MSE News: FSA plans self-cert mortgage ban

Former_MSE_Natasha · 15 October 2009 at 1:18PM

This is the discussion thread for the following MSE News Story:

"The City watchdog announced proposals today to ban self-certification mortgages and ensure all borrowers prove their ability to repay in advance ..."

Read the full story:
FSA plans self-cert mortgage ban

also see:

FSA Mortgage Crackdown: how it affects you

Thanks to moosegirl for the original post. These two threads have been merged to prevent duplication.

moosegirl · 19 October 2009 at 7:15AM

It seems that these types of mortgages are going to be banned. How will that effect those that already have them? We have one and my concern is that we won't be able to get a mortgage on this property again. Will they cancel existing ones or when you come to remortgage presumably it won't be possible to get a new deal? As it is we're stuck in negative equity and we can't any other deal other than letting this one run so we're on standard variable. We bought as everything started falling -Sept 07. Any help appreciated thanks.

koexelek · 19 October 2009 at 8:53AM

You will have to stay with your current lender. You will have a choice of remaining on their standard rate ( which is usually a good option in the current climate) or they may offer you a new product from their new range

judy.bailey · 19 October 2009 at 9:46AM

Hi moosegirl

Dont worry your not the only one in this dilema! We bought our house in feb 2006 we are now also in negatiuve equaity with a self cert mortgage. Our current deal ends in nov 2011 so this is really worrying for us. So does this mean we will not be able to shop around for mortages but instead will be stuck with our current lender? Why if they dont give us a mortgage?! Very worrying.

Oh well, heres hoping!

Thanks

koexelek · 19 October 2009 at 10:30AM

judy.bailey wrote: »

Hi moosegirl

Dont worry your not the only one in this dilema! We bought our house in feb 2006 we are now also in negatiuve equaity with a self cert mortgage. Our current deal ends in nov 2011 so this is really worrying for us. So does this mean we will not be able to shop around for mortages but instead will be stuck with our current lender? Why if they dont give us a mortgage?! Very worrying.

Oh well, heres hoping!

Thanks

You are probably worrying that your "deal" is coming to an end, not your actual "mortgage".
For example, you might take a 25 year mortgage with an initial 5 year fixed rate.
In your situation, it means you might not be able to get a new deal at the end of the initial 5 years, but you don't have to clear the mortgage until the end of the 25 year term.
As long as you continue to make all payments on time, you should have nothing to worry about.
If you are currently on a fixed, the chances are that your paymemts will go down, anyway

benjo · 19 October 2009 at 11:24AM

I read the headline and initially thought that the banning of self cert mortgages meant people who are self employed would not be able to get a mortgage deal, then I read the whole thing and ...No it doesnt mean that, it means that self employed people are still able to get a mortgage IF they can prove their income...lenders would be responsible for assessing a consumer's ability to repay their loan, taking into account their monthly disposable income. Nothing different here to what happens for the vast majority of borrowers and lenders.

I might be naive, but this could even be good news for the self employed. Presumably all self employed prove their income to the IR each tax year and so it shouldnt be a problem to do just the same with a mortgage lender, if this is the case wouldnt it be possible to qualify for high street lender deals at more competative rates than the self cert rates?

On the issue of toxic combinations, it makes sense to clarify 'irresponsible lending' and to avoid doing that again, what on earth is the point in buying a house you cannot afford? Not only do you loose your home, but you loose thousands of pounds in interest, fees and penalties etc - isnt it better that someone tells you 'Im sorry, you cannot afford this, at this time'.

There are any number of posts on the mortgage forums, from people who post their SoA's and it is quite obvious with hindsight that they could never have expected to service the loan for any length of time and now they face the heartbreak of repossession and eviction - I would prefer that my lender didnt lend me a penny more than I could afford to repay, I love my home and I never want to risk loosing it.

smk77 · 19 October 2009 at 12:25PM

moosegirl wrote: »

It seems that these types of mortgages are going to be banned. How will that effect those that already have them? We have one and my concern is that we won't be able to get a mortgage on this property again. Will they cancel existing ones or when you come to remortgage presumably it won't be possible to get a new deal? As it is we're stuck in negative equity and we can't any other deal other than letting this one run so we're on standard variable. We bought as everything started falling -Sept 07. Any help appreciated thanks.

I'm thinking the same. We're not in negative equity but do have a large mortgage that was easily within Nationwide's lending criteria 2 years ago when we took out a 2 yr fixed. Obviously at the moment we're enjoying the ability to overpay because we're paying the variable rate. However, since we took out that mortgage my son was born and my wife is working part time. This therefore affects our borrowing power and should we want to fix because rates go up we could find ourselves in the position that a lender believes that our income isn't enough for the mortgage. This could mean that we're stuck in a variable rate with absolutely no control over how much we'd have to pay each month. A little worrying!

_Andy_ · 19 October 2009 at 12:37PM

smk77 - If you're not borrowing any more money then your current lender won't re-assess income.

smk77 · 19 October 2009 at 1:50PM

_Andy_ wrote: »

smk77 - If you're not borrowing any more money then your current lender won't re-assess income.

thanks. that's very useful to know. :beer:

moosegirl · 19 October 2009 at 2:01PM

I'm glad we're not the only ones! I'm just concerned that if we need to prove income we will never be able to borrow the amount we have been leant. As it is our deal finishes on 31 Oct and we have to go to the standard variable rate as our LTV is 102% despite putting down a lovely deposit. The mortgage company will not offer us a fixed deal until the LTV is 95%. House prices up, base rate too? Our repayments are going to fall but I know this is false in the long term. I don't like the uncertainty and really do not want to lose the house. We'll keep hanging on. Thanks for all the replies!

Trollfever · 19 October 2009 at 3:51PM

I might be naive, but this could even be good news for the self employed. Presumably all self employed prove their income to the IR each tax year and so it shouldnt be a problem to do just the same with a mortgage lender, if this is the case wouldnt it be possible to qualify for high street lender deals at more competative rates than the self cert rates?

IMO the only self employed who could have issues are the newly self employed.

Should somebody who has only be trading for say six months take on a 25 year mortgage commitment?

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