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    • moosegirl
    • By moosegirl 19th Oct 09, 6:15 AM
    • 30 Posts
    • 8 Thanks
    moosegirl
    • #2
    • 19th Oct 09, 6:15 AM
    Banning self-certified mortgages
    • #2
    • 19th Oct 09, 6:15 AM
    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
    • By koexelek 19th Oct 09, 7:53 AM
    • 7,648 Posts
    • 16,202 Thanks
    koexelek
    • #3
    • 19th Oct 09, 7:53 AM
    • #3
    • 19th Oct 09, 7:53 AM
    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
    I am a Mortgage adviser
    You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
  • judy.bailey
    • #4
    • 19th Oct 09, 8:46 AM
    • #4
    • 19th Oct 09, 8:46 AM
    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
    • By koexelek 19th Oct 09, 9:30 AM
    • 7,648 Posts
    • 16,202 Thanks
    koexelek
    • #5
    • 19th Oct 09, 9:30 AM
    • #5
    • 19th Oct 09, 9:30 AM
    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
    Originally posted by judy.bailey
    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
    I am a Mortgage adviser
    You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
  • benjo
    • #6
    • 19th Oct 09, 10:24 AM
    • #6
    • 19th Oct 09, 10:24 AM
    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
    • By smk77 19th Oct 09, 11:25 AM
    • 3,346 Posts
    • 2,641 Thanks
    smk77
    • #7
    • 19th Oct 09, 11:25 AM
    • #7
    • 19th Oct 09, 11:25 AM
    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.
    Originally posted by moosegirl
    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_
    • #8
    • 19th Oct 09, 11:37 AM
    • #8
    • 19th Oct 09, 11:37 AM
    smk77 - If you're not borrowing any more money then your current lender won't re-assess income.
    • smk77
    • By smk77 19th Oct 09, 12:50 PM
    • 3,346 Posts
    • 2,641 Thanks
    smk77
    • #9
    • 19th Oct 09, 12:50 PM
    • #9
    • 19th Oct 09, 12:50 PM
    smk77 - If you're not borrowing any more money then your current lender won't re-assess income.
    Originally posted by _Andy_
    thanks. that's very useful to know.
    • moosegirl
    • By moosegirl 19th Oct 09, 1:01 PM
    • 30 Posts
    • 8 Thanks
    moosegirl
    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
    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?
    • koexelek
    • By koexelek 19th Oct 09, 3:44 PM
    • 7,648 Posts
    • 16,202 Thanks
    koexelek
    It's great news for the Inland Revenue.

    Any self employed people looking for a mortgage in the near future need to cut down on the cash in hand work now
    I am a Mortgage adviser
    You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
  • Mortgagehelper
    It's great news for the Inland Revenue.

    Any self employed people looking for a mortgage in the near future need to cut down on the cash in hand work now
    Originally posted by koexelek
    Exactly.

    Which, dear friends is a wonderful side product of these recommendations for the government's purse strings.

    I'm a cynic on these things

    Self Certs were originally designed only for the Self Employed - unfortunately lenders were at fault to offer them to employed applicants, as were certain unscrupulous brokers who milked them for all they were worth.

    I have had several new clients come to me over the last 2 years whose previous broker had gotten them a 'Fast Track' mortgage. Now most people didn't realise why they couldn't get a remortgage 2 years later....there are a lot about to have a shock soon..

    Fast Track was the next step of Self Cert - mainly for the employed, if you put down 25% deposit, lenders wouldn't ASK for confirmation of your income - basically self cert in all but name.

    That has now changed though - if you see 'Fast Track' now, you will now have to confirm income.

    A lot of these developments announced today have already been implemented by the lenders - so it annoys me greatly when the media go off on one about it.

    Watch the news people, it will be the next thing to blow up.
    I am a Mortgage Adviser
    You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it.
    This signature is here as I follow MSE's Mortgage Adviser code of conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
    • Bargain Rzl
    • By Bargain Rzl 20th Oct 09, 12:18 PM
    • 6,174 Posts
    • 21,392 Thanks
    Bargain Rzl
    Quote from your article:
    Your ability to repay will be assessed on your disposable income after all expenditure. This could go as far as having to declare how much alcohol you drink, how often you go on holiday and what clothes you buy.
    The more you spend, the less likely you are to get a mortgage. The days of borrowing a multiple of your salary could soon be over (though many lenders have already abandoned this method).
    But that's ridiculous. It's assuming that people base their "luxury" expenditure on their entire net income, rather than on their net disposable income. Surely it's only the financially illiterate and/or irresponsible (which would be indicated by other aspects of the state of their finances) who approach their expenditure in this way?

    If I spend a lot on luxury items, it's because that's what's left after I've made sure my mortgage is paid :rolleyes:
    Operation Get in Shape
    MURPHY'S NO MORE PIES CLUB MEMBER #124
  • judy.bailey
    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
    Originally posted by koexelek

    Thanks! I really do hope so. Glad this thread came up its cleared alot up. Thanks everyone
  • mortgage-adviser-now
    A Broad Brush covers everything with paint.

    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?

    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.
    Originally posted by benjo
    My experience tells me.

    'Loving their home', or potential home is exactly the reason why people borrow as much as they need to, and will often stretch themselves.

    The problem with the proposals

    The big issue is that no self certification and no fast track, under the proposals announced on Monday, means that Lenders will look for three years accounts showing steady or growing profit before they will approve a mortgage.

    Not possible if you have recently started trading.

    Not possible if you have invested heavily in the business to get it started or to grow it.

    Your accountant's job is to get your accounts efficient for tax purposes (within the law), not to show the most net profit for mortgage purposes.

    Examples and clarification

    If this all seems strange to those of you who are not self employed or not in the mortgage business let me give you two examples.

    1. Our locum GP client who wants to buy her first home. Locums are self employed and widely used in the NHS. She earns 70,000 as a Locum but has been trading about a year.

    Under the proposed rules there is no way she would get borrowing.

    If she takes an employed job tomorrow on 40,000 she would meet the proposed guidelines for borrowing even though her net income is now 1,250 less a month.

    2. Our client is a company owner who employs 12 people. His business has been hit by the recession and his profits have dropped.

    He needs 125,000 to invest in the business to get into a new market to ensure the survival of the business, future profit and the continued employment of his 12 staff.

    He cannot get business funding from the bank as they have no appetite for it. He is happy to raise the money on his home where there is good equity.

    Under the new proposals he would have no chance of a remortgage. His business will collapse and 13 more people will be on the dole queue.

    The big picture

    Many employees in this country depend on the self employed to give them a living.

    If we make it difficult for the self employed to provide homes for their families, and funding for their businesses. We will all be in much more trouble than we have seen in the past two years.

    What really happened to cause us all to be in this mess

    Despite what the press would have you believe. The banks ran out of money because they got greedy and lent money they did not have. NOT because the British man in the street stopped paying.

    Self certification, fast tracking lending and 100% loans did not cause this problem regardless of their respective merits to borrower and lender.

    Just a view from the front.

    I am a Mortgage Adviser

    You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
  • *MF*
    ^

    Using your examples - if the powers that have now established rules that dictate that the locum is not sufficiently credit worthy (yet) to obtain a mortgage - then by what criteria have they established that the secretary the locum employs is - common sense dictates that - if things get tight - the secretary as an employee may in fact be the greater risk.

    Ditto - the 12 employees in your example.

    Logic would dictate that the rules applied to the self employed should extend to those who are employed by the self employed - but logic is the missing ingredient in these rules, imho.
    Last edited by *MF*; 21-10-2009 at 2:59 PM.
    If many little people, in many little places, do many little things,
    they can change the face of the world.

    - African proverb -
  • MarkHarrison

    [.... lots of stuff I agree with deleted ....]

    What really happened to cause us all to be in this mess

    Despite what the press would have you believe. The banks ran out of money because they got greedy and lent money they did not have. NOT because the British man in the street stopped paying.

    Self certification, fast tracking lending and 100% loans did not cause this problem regardless of their respective merits to borrower and lender.
    Originally posted by mortgage-adviser-now
    This is where I disagree.

    My take on the matter is that self-cert DID cause the problem - it just wasn't self-cert in the UK.

    If you look at what caused the liquidity crisis, it was basically that financial institutions were securitising - lending money they had, but then turning those blocks of mortgages into bonds that other financial institutions (who wanted a broad exposure to the property market, not individual mortages) would buy.

    The problem came, particularly in the US, where there were high fees paid to brokers for getting ANY OLD MORTGAGE, and no-one in the fee-earning chain really cared whether it would run into default, since the broker got the commission up front (few clawbacks in the US), and even the bank who provided the mortgage just needed it to stay "being paid" for the 2-4 months it took to securitize that tranche.

    In the UK, it was only really Northern Rock that had bet the farm on being able to re-sell these mortgages (in 2007, they wrote about 70bn of securitised business, then came Abbey and HBOS with about 50bn each but as part of much bigger groups, then in fourth came GMAC at 15bn.)

    Northern Rock was suddenly unable to sell on a tranche, not because it had made risky loans, but because the (international) buyers had stopped buying, because they were starting to be burnt by tranches they'd bought in the US...

    ... and the rest is history.

    It's hard to see how the FSA can deal with that - short of locking up Britain, and stopping us being part of the international money markets.



    Oh, and as an IT Contractor who made a lot of money last year, but none in 2007 (when I was working for a startup which ultimately failed), I can wave bye-bye to my chances of a remortgage until 2011.
    • brit1234
    • By brit1234 21st Oct 09, 3:54 PM
    • 5,191 Posts
    • 11,968 Thanks
    brit1234
    Self certification, fast tracking lending and 100% loans did not cause this problem regardless of their respective merits to borrower and lender.
    Originally posted by mortgage-adviser-now


    Sorry have to disagree very strongly. High multiple, self cert, fast track, high multiples, interest only, buy to let gearing did cause the problem. It brought down a number of british banks because of over risky lending. This is the reason house prices went so high and will fall back to normal.

    Banks lent to much, borrowers borrowed to much and on many occasions lied. Internationaly property prices went up as credit limits were increasingly erroded and poped when the US was the first to fall and all the rest of the Western countries followed on.

    Its great these loans have gone as people liaing about their wages were pushing prices up further.
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  • mortgage-adviser-now


    Sorry have to disagree very strongly. High multiple, self cert, fast track, high multiples, interest only, buy to let gearing did cause the problem. It brought down a number of british banks because of over risky lending. This is the reason house prices went so high and will fall back to normal.

    Banks lent to much, borrowers borrowed to much and on many occasions lied. Internationaly property prices went up as credit limits were increasingly erroded and poped when the US was the first to fall and all the rest of the Western countries followed on.

    Its great these loans have gone as people liaing about their wages were pushing prices up further.
    Originally posted by brit1234
    Perhaps I did not make my point clear.

    The Banks caused the problem, not the British mortgage borrower defaulting on mortgages.

    There is nothing wrong with "High multiple, self cert, fast track, high multiples, interest only, buy to let" in themselves - only in how they were traded by banks.
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