Name: David Sheppard
Company: Perception Finance
There is no doubt that self-cert will be the casualty for the wider economic issues that the mortgage market has experienced. While we could all focus on the negative aspect of this, we have to move our sights onto how the industry can adapt without this product.
The starting point for change has to be an even better understanding of client
incomes especially those of self-employed people. For too long, it has been easy for
these clients to effectively be forced to go down the self-cert route, and this has
made improvements to underwriting and knowledge unnecessary.
Now that this option will not be available, there needs to be better use of credit data and maybe even specialist underwriting. The need for education is still there.
Only last week, one of our clients was asked to provide the most recent SA302 (Self
Assessment Tax Calculation), despite the fact that this document is no longer issued
to those people who do an online tax return and make no mistakes.
There is no questioning that a mortgage should not be taken out if it is unaffordable.
If these changes mean that this does not happen, we will be in a better place. That
said, affordability is a point that needs greater discussion as no two people are
the same. If anything, greater emphasis needs to be placed on having a better
understanding of the day-to-day finances of the applicant.
We all need to embrace change and learn how to better service the client. This
responsibility lies with all those who wish to move this market forward
Name: Paul Welch
Company: Large Mortgage Loans
It is true that the FSA has called for many changes to the market as part
of its style of regulation. However, once again, it can be accused of closing the
stable door after the horse has bolted. If the proposals are passed, which I am sure
they will be, they will benefit the mortgage market, but why now? Why did we allow
this to happen in the first place? It is very simple – greed.
The key proposal was to ban ‘liar loans’, as self-cert mortgages are known in some quarters. Most of the lenders have implemented the required changes and the industry has already self-regulated.
In 2007, many lenders offered self-cert deals, and now there is only one. The more interesting challenge is what will happen to those customers who are paying their
existing self-cert mortgages and now find themselves stranded on their current
product. So much for treating customers fairly, or did we fail them in the first place as
an industry?
The self-employed will now have to do what employed people do and prove their
past incomes. I cannot see how you cannot find a way to prove your income unless you
are not declaring your income. With that in mind, the only people who will suffer from
the end of self-cert will be the tax dodgers and the liars. How is that a bad thing?
I think this is very simple and if you can afford a mortgage, you will be able to
get one (just as you can now, albeit with a much larger deposit). If you cannot afford
one, you will not be able to. This seems to me an entirely reasonable premise on
which to base a lending market.
Name: Melanie Bien
Company: Savills Private Finance
Anything that protects the consumer and puts them first is welcome, but
there is a danger in more ‘intrusive and interventionist’ regulation. The FSA said its
plans are “designed to tackle the problems identified while maintaining a vibrant and
sustainable market”.
However, the mortgage market is not vibrant by any standards, and excessive
regulation could further stifle it. More regulation will come at a cost, which will
be passed onto the consumer. While it is important for lenders to ensure that borrowers can afford their mortgages, excessive affordability checks will slow down a process that can already be time-consuming.
If interest-only mortgages disappear, many first-time buyers could struggle. Although it is important to clear the mortgage balance by the end of the term, interest-only can be useful in the early years to keep payments down.
Buy-to-let regulation should be a positive move, as many landlords have only one or two properties. But there is a danger that they will pay higher rates and fees. There is already a dearth of buy-to-let mortgages, making it difficult for landlords to remortgage.
The self-employed will also find it hard to get financing unless they have at least two years’ worth of accounts. Self-cert has all but vanished anyway, but for the right sort of client, who did not have proof of income, it was a useful tool.
The review contains some good proposals, but if implemented, it could become
harder for some borrowers to access competitive financing.
