Self-cert " made up nearly half of all the mortgages offered at the peak of the boom"

Thrugelmir

andykn wrote: »

Didn't a lot of the self certs require quite high deposits, much more tricky to fake.

No. High LTV's just like any other mortgage product.

andykn

Thrugelmir wrote: »

No. High LTV's just like any other mortgage product.

Any figures for that?

Thrugelmir

Some info for you.

Accurate time series data to track the growth of NIV mortgages is difficult to obtain. For the period before the FSA’s regulation of mortgages in 2004, third party sources suggest that sales had grown by 29% annually for each of the years 2000 to 2004.

FSA product sales data for the subsequent, FSA-regulated period confirms this trend. And by the time the mortgage market reached its height in 2006/07, 45% of all mortgages were advanced on a NIV basis.

NIV -= non income verified

Not surprisingly, a large number of the borrowers who took out such mortgages fell into arrears soon after. It is difficult to analyse arrears rates separately for self-cert mortgages, as many statistics capture both self-cert and fast tracked mortgages in the same category. However, arrears rates can be up to three or four times higher than that of an income verified borrower. And the arrears rate is even higher if the transaction features additional risk characteristics, such as a credit-impaired borrower or a high LTV ratio.

Some lenders also started to blur the lines between self-cert and fast tracked products. While the former represented a high-risk product due to the perceived income uncertainty, the latter was the acceleration of an internal process that was said to be reserved for borrowers with a particularly low credit risk (usually measured in terms of LTV ratio, LTI ratio, credit score or similar metrics). Yet the distinction became blurred over the years as lending standards and risk thresholds decreased, and fast tracking was being applied, and often sold explicitly, to ever riskier applicants. Some market analysts now suggest that, like self-cert, fast tracking has become an adverse loan characteristic that produces arrears rates that are worse than those of income-verified products.

This market segment has also shown itself to be unsustainable. At the height of the market in August 2007, 44 lenders offered self-cert products, a figure that dropped to 22 in August 2008 and to a mere two lenders by August 2009.

Self-cert as a product has experienced a much more severe contraction than the overall mortgage market. Fast

track has also been impacted by the downturn and although some lenders still employ it, they only do so at much lower risk thresholds (for example, LTVs of 60% or less).

andykn

Thrugelmir wrote: »

Some info for you.



NIV -= non income verified


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Thanks, but none of that shows me what sort of LTVs were available on self certs - my memory was that self certs were only available with relatively high deposits (25% or more).

"Fast track" mortgages, on the other hand, could easily apply to any high street product without us knowing.

carolt

Interesting quotes, Thrugelmir - where are they from?

andykn - no, I know because we were offered them, self-cert at 85% LTV for good rates, but don't forget also Northern Rock was offering self-cert on its 'Together' mortgages.

Now there's a nice combination - 125% LTV mortgage based on an unverified income. :eek:

We were offered this, but turned them down, as we just thought it was utterly bonkers. We were offered frankly terrifying amounts of money, some of it in the form of an unscured loan - far more than we wanted or needed. I laughed when they suggested it (they suggested it - we didn't ask).

Utter madness.

Thrugelmir

carolt wrote: »

Interesting quotes, Thrugelmir - where are they from?

The FSA mortgage review.

Thrugelmir

andykn wrote: »

Thanks, but none of that shows me what sort of LTVs were available on self certs - my memory was that self certs were only available with relatively high deposits (25% or more).

"Fast track" mortgages, on the other hand, could easily apply to any high street product without us knowing.

The lenders who created these products. Are no longer. So the FSA doesn't have precise figures unlike the stats which come from CML lenders.

You may have a seen a product with 25% deposit. As originally they were created for the self employed. However they got hijacked as certain lenders just were out to lend money as the narrative explains.