Last week the FSA released its consultation paper on ‘responsible lending’, which has now put an end to ‘self-certification’ and ‘fast track’ mortgage applications, through the required verification of applicants income in all mortgage applications.
Many in the industry such as ourselves are not surprised with this recent move, restricted products and criteria have all but seen the ‘self certification’ or ‘fast track’ mortgage become either unavailable or financially unaffordable.
Self Certification mortgages were originally designed to help the self employed, people with irregular income and income from various sources to be able to fund their own home. Fast track mortgages were a way of lenders being able to reduce time and costs when assessing mortgage applications, by focusing on applicants credit history, deposit used and overall financial risk. Unfortunately due to the lack of regulation the ‘self-certification’ product and the ‘fast track’ system were often abused by people wishing to artificially inflate their incomes.
We certainly won’t argue that something needs to be done to improve the quality of lending to ensure what went wrong, won’t go wrong again. However we are concerned that with this amendment to current regulation, many existing clients may be left in a very difficult and possibly financially precarious position, it will also exclude the many thousands of quality clients from being able to obtain a mortgage. Costs to lenders will again increase, which unfortunately will most likely be passed on by the lenders to their customers.
Gary Wright CeMAP, Partner of Mortgage Advice Network