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