Self Cert Mortgages Are Back

Self Cert Mortgages Are Back.

Self cert mortgages, now there is a blast from the past. Some people may remember these types of mortgages but many people will not given the financial regulator technically banned mortgage companies in the United Kingdom offering these types of mortgages many years ago.

What is a self cert mortgage?

It is a mortgage where the lender will not verify your income. You simply state what your income is on the application form and they will accept it assuming it appears reasonable.

Why was it banned in the UK?

Quite simply, people were stretching the truth about their income in their mortgage application. This led to people getting into difficulty and indeed some lenders doing the same for having ‘bad debts’. In addition, following the ‘credit crunch’ many lenders were told to be more responsible with their lending policy.

Apparently, a new self cert lender has entered the market in the UK. This is reported to be payday lender Quick Loans having established a ‘self cert’ mortgage lender in Prague, Czech Republic.

European rules allow banks, lenders, financial advisers and investment companies to ‘passport’ their services throughout Europe. In short, the mortgage is set up under Czech law but can be distributed to UK residents and this by-pass UK regulatory rules.

Comment

Whilst no doubt there is demand for such a product, the fact you can self-certify your income clearly leaves it wide open to abuse. In addition, if you have taken a ‘non-advise’ execution only mortgage out with a lender outside the UK, there is literally no protection from the UK regulator or UK complaints and financial ombudsman service.

The Financial Conduct Authority has already issued a warning of the risks.