Best Loans News

We have reported recently on how the Financial Services Authority (FSA) is planning to place a complete ban on self certification loans and fast track mortgage applications, whereby a borrower does not need to provide evidence of their income. Under the new proposals, a borrower would have to be able to provide proof of their income in every case to justify the loan.

According to the latest figures from the FSA, around 43 per cent of all home owner loans were completed on a self certification basis in the first three months of this year, with no income verification taking place.
This suggests that lenders are either not embracing the FSA’s proposals, or they are making the most of self certification loans before they are banned completely.

However, a survey from the specialist lender Paragon Mortgages, has found that from the financial intermediary and loan broker market, only 0.7 per cent of all loans were completed on a self certification basis in the second three months of the year.

Back in 2007, self certification loans accounted for around 13 per cent of intermediary business, but along with bad credit loans or sub prime loans, this figure has steadily dropped over the past few years, to the point where it is almost non existent.

John Heron of Paragon Mortgages commented on the decline of business, he said “It is not surprising that the level of both self cert and sub prime business going through brokers has declined over this period because lenders simply aren’t making the products available.”

“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.”