The self-certification market ‘ traditional haven of the self-employed ‘ is maturing and expanding.
More mainstream lenders are now joining the ranks of specialist lenders to offer self-cert mortgages, making the range of products available more flexible, better value and increasingly competitive.
Most self-cert business tends to come from the self-employed sector, which currently accounts for around 11% of the UK’s work force. But it would be wrong to assume that it is only the self-employed who are potential self-cert customers.
PAYE clients are a growing part of the market and probably account for around a third of self-cert business.
This group includes the growing number of people who work on a contract basis ‘ traditionally the territory of IT workers ‘ contract working has now spread to health and teaching.
Recent research has shown that self-cert is now the largest component of the ‘specialist lending’ sector and is thought to be worth about £11bn per annum. So it is hardly surprising lenders are vying for their share of this market.
Is the self-cert market a good place to be at present?
The recent trend in the market has been toward ‘true’ self-cert mortgages where lenders do not require any proof of income.
But a number of commentators have raised doubts about self-cert. Their concern centres around the impact on brokers of proposed regulation and in particular, whether or not brokers can be expected to make a reasonable assessment of a client’s ability to afford their mortgage if no evidence of income is required. In this context, they argue that ‘true’ self-cert mortgages are potentially bad for brokers.
Certainly this issue cannot be taken lightly. Against a backdrop of significant house price inflation, there could be a temptation for borrowers to consider using self-cert to bypass restrictive income multiples. Self-cert products are clearly not designed for this purpose and mis-use could potentially leave borrowers exposed if interest rates increased.
But lenders are well equipped to support brokers, both in developing the self-cert market and from a regulatory standpoint. I would argue that fears about self-cert are exaggerated.
First, there is the economy. With interest rates at their current levels, mortgages are more affordable now than at any time in the recent past. Obviously this will not last forever, but low rates are predicted for the foreseeable future.
Second, lenders have a variety of mechanisms in place ‘ even for ‘true’ self-cert products ‘ to verify the creditworthiness of borrowers.
Whatever the mechanism, the message from lenders is that they are well placed to manage self-cert business and to support brokers in this important and growing market.
Andrew Moss is product development manager at Mortgage Express