An increase in small businesses has lead to massive growth in the self-certification mortgage market. The Office of National Statistics has said that 396,339 new businesses started up last year, compared to 292,374 in 2003, and mortgage lenders have responded to the growth accordingly. Tax reforms that made creating a small business easier are thought to be behind the increase. Many mainstream lenders now offer all of their rates on a self-certification basis. The proof of income is no longer the sole responsibility of the borrower. Instead, if a self-certifying borrower gets a clean bill of financial health from a credit reference agency, then they can in the majority of cases, get a decision on the spot.
Our view
This may prove difficult given that Mortgages became regulated by the Financial Services Authority in October 2004. The FSA is not keen on self certified mortgages and expects, as part of its Mortgage Conduct of Business Rules that lenders have a duty to ensure that a borrower can afford the mortgage that they take out.