January 28th, 2016
The Financial Conduct Authority has presented a clear warning to any borrower, looking to take a self- certification mortgage for a property. In lieu of the news last week, that a new self-certification lender, selfcert.co.uk, had launched products for borrowers unable to provide income evidence in the conventional manner, has spurred the regulator to confirm that borrowers using the scheme would receive “no UK regulatory protection,” if issues arise.
To circumnavigate current UK rules that ban lenders from offering such loans, the owner of selfcert.co.uk, Graeme Wingate, chose to set up his firm in the Czech Republic. As such, UK borrowers would be in a position to secure funding via the lender for a UK based property, if they can satisfy the lenders requirements.
Self-cert mortgages were banned by the FCA in 2014, amid concerns that lenders offering the process were willingly accepting over-inflated incomes from borrowers, potentially allowing mortgage loans that were not affordable for the customers involved.
Self-cert.co.uk has chosen not to lend in and around the M25 area, on the basis that the firm is “concerned about possible bubbles in the London property market”. This is also reflected in the lending limits set by the lender, with a maximum loan size of £500,000 currently available, based on a limited lending pot of £50m with a minimum deposit required of 15% of the property value.
The FCA warning cited the impending European credit directive as a key reason for not allowing the self-cert practice back into the UK mortgage market. Set to take effect from 21 March 2016, the directive sets out that all mortgage lending across the EU needs to be fully assessed via a detailed affordability process, by gathering documents and evidence that support the case. An addition to the policy began to take effect in 2015, when UK lenders took the decision to no longer accept any income evidence where the earnings were paid in a foreign denomination.
As per the warning document, the FCA stated: “If you take out a mortgage offered from outside the UK under the ECD, you will lose important UK consumer protection benefits, such as the right to refer complaints to the UK’s Financial Ombudsman Service and to be treated fairly when facing payment difficulties.”
During the 2014/2015 period, the Financial Ombudsman service settled 448,387 disputes, relating to financial products and processes.
Article By: Simon Butler, Senior Mortgage Consultant at Contractor Mortgages Made Easy
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