After the market turmoil of the last 2 years it is a surprise that this area did not come under focus sooner, but the solution of a complete ban may turn out to be the proverbial “hammer to crack a nut”.

From a lenders perspective, it makes sense to ensure that a borrower can afford to make the payments on their mortgage and that this income has been legitimately obtained.  If they do not check this affordability then they only have themselves to blame if the loan goes bad. However the change in regulation is proposed by the FSA and not the lenders, who continue to offer self cert mortgages, albeit in reduced numbers, at the time of writing.

It is likely that the new regulations will make it very difficult for lenders to provide creative products for borrowers who have a genuine difficulty in proving all sources of income to the satisfaction of a “lending official”. This will be particularly true if the method of proof is prescribed by Government bodies.

Self Certified mortgages, used correctly, have been a perfectly acceptable method of borrowing; they have been abused by sharp practice amongst mortgage brokers and poor administration by lenders but the risk associated with the reduced paperwork for this type of loan is generally offset by the increased pricing of the product.

There is still time to use the self certification route sensibly and consider other alternatives before legislation forces the point.

Whether you are looking to buy your first home, move house or just ensure that you have the best mortgage deal, my advice is to speak to an independent broker as a matter of urgency to review your options and make a fast decision on what to do before new regulation is implemented.

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http://news.bbc.co.uk/1/hi/business/8313853.stm

We all know that there is a looming pension crisis in this country and all the major political parties agree that pension reform is essential. In the past decade we have had various initiatives to try and stimulate more pension contributions such as Stakeholder pensions and the 2006 Pension Tax Simplification reforms. There have also been reforms introduced to the State Pension schemes with more to follow.

However, perhaps the biggest and most important reform is just around the corner. The above mentioned initiatives have largely failed to encourage the Great British public to contribute to a pension scheme and so the Government are going to the next obvious step. From April 2012, pension contributions will be compulsory for all employees and employers. For employees who do not have an employer’s pension scheme available to them, a new scheme (largely based on the existing personal pension rules) called Personal Accounts will be introduced to accept their pension contributions. A new body has been formed, PADA (Personal Accounts Delivery Authority), and they will be responsible for delivering this new scheme. However, whilst the topic of Personal Accounts has been the source of most discussion over recent months, I believe that it will be Auto Enrolment that should and will focus most Employers minds.

Under Auto Enrolment rules, employees will be automatically enrolled into a pension plan – it will not matter whether that scheme is a Personal Account, a personal pension or a group personal pension. If the employee does not want to join a pension scheme they will have to elect to ‘opt out’ of pension contributions (this decision will be reviewed periodically with the objective to ultimately auto enrol all employees). If an employee does not elect to opt out the employer will also have to make a pension contribution. It will be the employers’ responsibility to deduct contributions from their employees and make sure the contributions go to the relevant pension scheme and it will also be Employers who are saddled with the task of ensuring that their employees are enrolled or opted out. Not only will they have to find extra revenue to make an employer pension contribution to their employees pension fund, they will also face the prospect of fines and even the threat of a prison sentence if they or their employees breach the rules.

Many employers and business owners will not be aware of any of this, and as these rules will be with us with in 3 years it will have a major impact on their business plans.

If there’s any moral to the tale of Auto Enrolment, it’s seek advice at the earliest opportunity.

Please call us on 0845 30 50 222