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The end of self cert mortgages?

I wrote an article some time ago about the FSA’s proposed changes to end self certification and fast track mortgage lending in which I made a big point about how this could leave a lot of people struggling to refinance and cause trouble for the recovery of the housing market.

The FSA last week confirmed that action would be taken, and the press have been making similar observations to my own today about the impact that this could have on our recovery and those borrowers with an existing loan of this type.

But over the weekend I had a realisation and did a u turn on the subject. In reality there are few if any legitimate borrowers who cannot “prove” their income. The point being that “proof” and it’s interpretation is the key point here, because almost all people can show evidence that the income they declare is broadly accurate however they may not be able to prove income in the manner that a normal full status mortgage would require.

For example if you have a business from which you could take far more income than you currently do without running the business into decline that is your prerogative, and if you can show that you can still afford a large mortgage then fine, but you can also evidence that your business has the potential for you to take further income. It may not be satisfactory at your local building society now, but lenders with good product development teams will soon see how to create a new type of product to cater for this market once their appetite comes back.

So if the FSA get this legislation right and don’t dictate or define what proof consists of then there will still be the opportunity for lenders to market products for those with non standard income, priced above full status products as before but simply requiring some evidence to back up that the income declared isn’t total fabrication. This is what’s needed in the market and the FSA just need to be careful not to try and make this legislation so watertight that it chokes the housing market to death.

THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE OR ANY OTHER DEBT SECURED ON IT. YOU DO NOT HAVE TO PAY A FEE FOR OUR SERVICES AS WE RECEIVE COMMISSION FROM LENDERS. SOME BUY TO LET AND COMMERCIAL LOANS ARE NOT REGULATED BY THE FINANCIAL CONDUCT AUTHORITY
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