Non-conforming lender Mortgages plc has developed an affordability declaration for self-certification mortgages which informs borrowers as to the likely impact of a change in financial commitments.
The move follows concerns raised by the Financial Services Authority (FSA) in CP186 over allowing employed borrowers access to traditional self-certification mortgages. The FSA wants lenders to fully assess borrowers’ ability to repay before committing to the loan.
Peter Beaumont, sales and marketing director at Mortgages plc, said: “Borrowers are best placed to know if they can afford their mortgage, but they need to be aware of the impact interest rates and further financial commitments have on their monthly payments. Borrowers need to be sure that they can afford their mortgage, not just for today, but also for the future.”
The declaration has been initially introduced on a trial basis and includes information on the potential effects of a change in interest rates, new loans, and credit card debts. Borrowers have to read and sign the document before the money can be released.
Commenting, Tim Dawson, managing director of Mortgage Express, said: “The FSA has to understand that restricting self-certification would be anti-competitive and unfair. It would have been very easy to segment borrowers a few years ago, but with more people doing contract work or acting as consultants it would be totally inappropriate. If it does not change it will be down to lenders’ interpretation. A declaration would be one way, but credit scoring is another.”