The multibillion-pound self-certification mortgage industry, in which customers are not required to provide proof of income, is set to be banned by the financial regulator.
Dubbed “liar’s loans” by critics, self-cert loans were blamed for playing a large part in the housing bubble and ensuing financial crisis. Blame unfairly apportioned in my opinion.
Experts believe that self-cert accounted for one third of new loans in 2007, or about £100 billion of the £300 billion loans granted that year. Buy-to-let accounts for 12 per cent of all properties, or more than three million homes.
At a time when we are struggling to escape recession and the housing market needs all the help it can get is this really the time to stop a scheme that has been running for ever and does not really do any harm, people have all kinds of legal reasons why they don’t want to declare their income, and if they are able to service a debt what’s the problem.
It’s true that their is a slightly higher default rate on repayments but when you look at the amount of business generated that figure is negligible. as usual the Authorities have got it wrong.
Disagree. Self Certs has gotta go and replaced with something more robust. When I got my mortgage on my current house nearly a decade a go, it was 3x your salary full stop. non-negotiable. 3 times salary. FULL STOP.
ReplyDeleteA few years later when the credit frenzy really started some self-certers would massively inflate their salaries, and get a 5 or 6 times mortgage. Amazing.
Now you might say "as long as their servicing that loan, that's fine by me" - but there's a wider picture to consider. What about the deceit? To clearly construct books that does not represent the truth - isn't there a law against this stuff?
If that's deemed OK, then so would obtaining a stolen car and saying "well as long as they pay their road tax - that's ok" - It's not. It's still obtained with criminal actions.
Also, consider the effect they have on house prices generally? Inflating prices when in fact they shouldn't be. Imagine if all the houses down your street doubled because they were being snapped up within 2 seconds after going on sale.
Imagine if your daughter who worked as a senior manager at BHS for example, failed to secure the mortgage on one of those houses, yet the part time plumber who was fixing your pipes actually just brought 2. You see, your daughter couldn't fake her earnings, never in a million years. The plumber? Where's that pencil....
This kind of stuff really did happen, and hopefully it will change for good.
And another thing. You said 'people have all kinds of legal reasons why they don’t want to declare their income'
ReplyDeleteThats a bit disingenuous - there's a little thing called Income Tax. This tax helps support the services that everyone uses - so non-declaration or deceit or avoidance annoys me.
I don't have a choice, mine gets deducted at source, and so does millions of others. Just because someone is self employed doesn't make income tax an "optional" tax.
I bet those who treat it as an optional tax don't have any qualms about claiming the dole when things go awry. Or when they're ill walk into a hospital and demand to be treated equally to everyone else.
I knew a guy several years ago who was proud he paid the absolute minimum income tax he could, yet he moaned about the state of the economy (ooh the irony! Can you see the irony!) and about asylum seekers, single mums on the dole, scroungers etc. I argued that only i have the right to moan, as he wasn't contributing to any of those things - but the irony was lost on him.
Sorry - I digress - but had to pull you up on that line "people have all kinds of legal reasons why they don’t want to declare their income".
I meant all kinds of reasons not to declare it to the mortgage company , obviously I did not mean the tax man.
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