Previously banned self-cert mortgages will now be available in the UK once more, following the launch of a new lender.
Selfcert.co.uk, a start-up backed by private equity investors and based in the Czech Republic, launches with a tracker loan set at 2% above base rate.
The start-up will lend up to £500,000 at 85% loan to value, with fees reported to be around £600.
Initially targeted towards self-employed borrowers, self-cert mortgages do not require proof of income and were a very popular source of mortgage finance until they were banned by the Mortgage Market Review.
While self-cert mortgages are still banned for FCA-regulated lenders, Graeme Wingate, the founder of unsecured lender Quick Loans, has managed to bypass UK regulation by setting up the business in Prague.
Selfcert.co.uk plans to assess affordability by analysing social media accounts and will accept customer invoices as evidence of income.
Graeme Wingate, founder of Selfcert.co.uk, said:
“We hope to do all the paperwork in-house, which means we can do it for much less than high street lenders.”
“We had emails of support from around the UK. We have an unofficial waiting list of about 80 people. There are lots of wealthy people who just don’t fit banks’ criteria and are being punished with high rates.”
Previous analysis by the Financial Conduct Authority (FCA) has shown that self-cert borrowers take out larger loan amounts than borrowers with standard products and fall into arrears much more frequently.
In November, a spokeswoman for the FCA stated:
“A firm located in an EEA Member State can provide a lending service under the Electronic Commerce Directive to UK consumers, but the service has to be provided solely at a distance and on-line.
“This service however would not be regulated by the FCA and if something went wrong, the FCA is not generally able to intervene, additionally there would be no recourse to the compulsory jurisdiction of the UK’s Financial Ombudsman Service.”
Commenting on the launch, Jeni Browne, head of regulated and buy to let lending at Mortgages for Business said:
“We always welcome new lenders to the market and applaud innovation. However, for now, we will not be looking to place mortgages with this lender, as we would have concerns about the customer’s ability to service the debt going forwards and would not wish to put them in financial risk.
“I would also say that as the company is based in the Czech Republic and thus falls outside of FCA regulation, we would not be in a position to run due diligence on this company, to ensure that their T&Cs are fair and proper.”
Although self-cert is no longer an option, customers who find it hard to prove their income are encouraged to contact us for help as there may be solutions available. Call 0845 345 6788 to speak to a qualified residential mortgage mortgage broker or call one of the mortgage brokers listed below directly.