It is predicted that self-certification mortgage rates could soon be as low as those for mainstream products as competition increases. The amount of mainstream lenders offering fast track rates has led to increasing competition in the self-cert market, with some predicting the to categories will merge.
Other lenders seem to be questioning whether lower self-cert rates mean that there is a narrowing of the gap in the market, or whether this is more of an erosion of true self-certification. Bristol & West believe that because lenders are asking for less verification on standard products, it is no longer clear what comprises a self-cert mortgage, but, as it costs a lot more for a lender to provide this type of mortgage, the cost will always be higher.
Our view
There is a market for these type of mortgages, particularly for self employed and business owners. It is just that new regulation of mortgages by the Financial Services Authority gave the requirement that lenders and financial advisers should check the suitability and affordability of a mortgage. This meant that the self certified income mortgage market i.e. mortgages where the borrower just signs to say they can afford a mortgage without proving income declined in availability out of fear of being sued or fined for negligence.