Self Cert Mortgages Return

There has been a new lender entering the market recently specifically to target the Self Certification market. The lender, SelfCert.co.uk, is based in Prague in order to circumvent the Financial Conduct Authority (FCA) ban on such mortgages being offered by UK based lenders.

Self Certification mortgages first came into the market in the 1980’s and was aimed specifically at the self-employed small business sector. Under self cert the borrower was actually allowed to declare what their income was with no requirement to provide proof of how the figure was reached. The rationale was actually quite sound, many small tradesman earned far more than their taxable earnings would suggest, a combination of not declaring cash in hand work and claiming lots of deductions against tax. Where they came in disrepute was during the lending boom of the noughties when lenders allowed employees to self-certify. Not having to prove income was tempting for many borrowers and brokers and there was some justification when Vince Cable famously labelled them “liar loans” After the credit crunch the FCA decided that this type of business was not acceptable and prohibited UK based lenders from offering them. This has had a profound impact on the market, understandable when you realise that prior to the credit crunch self cert accounted for almost 1/3 of all borrowing.

With no sign of a change to this prohibition in the future SelfCert.co.uk came into the market late last year. They had a relatively small amount of money to lend, £50 million, and this has been gobbled up in 4 days so they have stopped accepting new applications for 3 months.

While it will be understandable for borrowers to think this is a good way to get a mortgage it is potentially very risky. The chief concern is that the lender is not covered by the Financial Services Compensation Scheme (FSCS), so a borrower will have no recourse if things go wrong. As they are based in the Czech Republic they will fall under that countries regulatory regime and borrowers would be advised to research what that is. Finally the business can only be conducted online, there is no facility to be able to call the lender, and I can see that being a real issue for some people.

We will monitor on a regular basis what happens with SelfCert.co.uk and update if we feel anything is worth mentioning.

In the mean time please fee free to contact us for more information on mortgages and remortgages at www.mortgage-finder.org