Those who have a keen interest in the future of self certified mortgages may have noticed that they are beginning to appear more and more frequently in the media. Self certified mortgages – which enable the borrower to certify their income without needing to supply standard income documentation – may be extremely popular with the self employed but they are also a cause for concern for the regulatory bodies.
Despite being introduced over ten years ago, it is only over the last few years that significant concerns have been raised over the future of self certification mortgages. Many experts believe that although these mortgages have worked well until now, the situation could be completely different should the UK economy take a turn for the worst. The worry is that mortgage lenders have, during the last few booming house market years, relaxed lending rules too far allowing many unsuitable borrowers to qualify for self cert mortgages.
Traditionally self certified mortgages were normally only suitable for the self-employed. However as the UK economy has grown in strength, the attitude towards self certified mortgages has changed, resulting in lenders approving mortgages for a range of applicants such as temporary employees or part-time workers. Moreover, there are concerns that desperate house buyers may lie about their income in order to secure themselves a mortgage.
These concerns have been thoroughly investigated by the FSA and on the whole it is thought that the majority of those being accepted for self certified mortgages are not being encouraged to exaggerate their income and that they are fully suitable for self certified mortgages. This is thought to be as a result of a push for lenders to tighten up their procedures in detecting more fraudulent applications. Although normally this would suggest that the future of self certified mortgages is secure, the regulatory bodies still seem to be concerned over the possibility for future abuse of the system.
So what does all this mean for the average borrower interested in self certifying their income? The changes in regulation which have so far taken place may mean that it is more difficult to obtain a self certified mortgage. However, it also means that you are only likely to be accepted for this type of mortgage if you are really suitable for it. For those borrowers who are bent on obtaining a mortgage regardless of whether they have to lie about their earnings, the future may indeed be bleak but for those who are interested and genuinely meet the self certified mortgage criteria, the future looks bright.