Research by Paragon showed that self-cert business has fallen significantly in the past three years, since it started tracking self-cert in Q1 2007. Then, it accounted for 13% of business.
The lack of self-cert products from lenders has stifled the sector, which is set to be killed off by the FSA’s plans to require income verification for all borrowers.
Paragon also found that sub-prime business has dropped markedly on 2007. In the first three months of 2007, sub-prime accounted for 7.2% of business, before falling to just 0.4% in Q2 2009. It has now rebounded modestly to 1.8% of brokers’ business.
John Heron, managing director of Paragon, says: “Since the onset of the credit crunch, lenders have focused the majority of their available funding on prime residential mortgage customers, meaning that ‘non-conforming’ borrowers are unable to step onto the property ladder. Those lenders that do offer self-cert or sub-prime mortgages appear to do so direct rather than through the intermediary market.”
He added that the increasing number of borrowers falling outside lenders’ profiles of prime customers had lead to a rise in demand for rented property, with Paragon research showing that three times as many landlords reported rising tenant demand in Q2 than falling.
