Loss of self-cert mortgages 'could see greater tenant demand'

21 July 2010

Written by David Whittaker

Research has found that self-certified mortgages, which would effectively be abolished by Financial Services Authority (FSA) proposals to impose rules that would see the income of all borrowers verified, account for less than one per cent of business for intermediaries.

According to one organisation, this change could see an increase in the number of people looking to lease property.

Paragon Group conducted a panel-based poll of home loan brokers and found that the products made up 0.7 per cent of their trade in the second quarter of 2010.

The FSA claimed in its recent Mortgage Market Review: Responsible Lending that 43 per cent of lending for property purchase in the first three months of the year was authorised without verification of borrowers' income.

John Heron, managing director of the company, explained that providers were not making self-certified and sub-prime mortgages available, seeing "non-conforming" customers unable to buy homes.

"The exclusion of borrowers who do not comply with lenders' profile of a prime customer is creating further demand for rented property," he commented, adding that a study by Paragon had found that the number of landlords noting a rise in tenant demand had increased thee-fold compared to the first three months of the year.

Indeed, the Association of Mortgage Intermediaries warned that some customers could be excluded should the FSA's proposals go ahead, although it welcomed measures that ensured house buyers were able to afford their home loan.

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