Ban on self cert mortgage rates

Deals for self cert mortgage rates are to entirely disappear under new Financial Services Authority rules. A ban on self cert mortgages will mean many self-employed home buyers will find it difficult to qualify for a mortgage.

The FSA wants lenders to take adopt a new approach when assessing what buyers can afford to borrow and wants a ban on some loans such as those for self cert mortgage rates. It is the regulators intention to prevent a repeat of the risky lending seen in the years between 2004 to 2007.

Paul Broadhead, head of mortgage policy at the Building Societies Association said, “The whole purpose of the regulator’s changes is to put responsibility at the heart of lending. We have to be sure that we stop giving mortgages to people who shouldn’t have them, but are still helping creditworthy borrowers get on the housing ladder.”

Lenders will no longer be able to offer self cert deals to self-employed customers who were allowed to borrow without needing to prove their income. The FSA has said that lenders will be allowed to 'bend' the rules for existing borrowers on deals with self cert mortgage rates. Those existing borrowers, who have been up to date on repayments for at least 12 months, will be allowed to re-mortgage or switch their loan to a new property even if their income does not fit the new rules. However, they will not be allowed to make any additional borrowing.