Mortgage Regulation

You may have seen the FSA are planning on tightening up on mortgage lending, specifically self-certified lending.

This does not require any proof of income and was originally designed for start-up self employed people, who had not  traded long enough to produce accounts. However, it became a mainstream product and was widely abused, with employed people taking self-certified mortgages because they could exaggerate their income – so shop assistants suddenly earned £50k+ a year!

If you cannot now prove your income with P60′s or SA302′s you will struggle to get a mortgage. Indeed, it may become impossible.

The FSA are also encouraging lenders to check affordability far more stringently. This will result in income and expenditure being analysed to ensure you are not over-stretched with your mortgage, which may see a move away from income multiples and towards affordability as the main test of how much can be borrowed.

For prime borrowers – those with at least a 25% equity, good earnings relative to the mortgage and a clean credit history – these changes will make very little difference. Those who are stretched financially, have a poor credit history or a small amount of equity may find getting a mortgage becoming far more difficult.

This entry was posted on Tuesday, October 20th, 2009 at 7:34 am and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.