Where Does the Death of Self-Cert Leave Contractors?
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The Bank of England have again held the base rate at 0.50%, as they strive to steer the UK economy out of recession with the help of the Treasury and the Financial Services Authority (FSA).
Last month the FSA took an initial step towards this by announcing new proposals that included a ban on Self-Cert Mortgages.
Self-certification mortgages, also dubbed liar loans, accounted for one third of new loans in 2007, or about GBP100 billion of the GBP300 billion loans granted that year.
The FSA argue that mortgages that don?t require any proof of income have been abused during the property boom with many people borrowing more than they could afford to repay. This theory has been backed up by the collapse of Bradford & Bingley and the sale of HBOS to LloydsTSB, both HBOS and B&B were among the biggest self-cert lenders.
Additionally, Platform, one of the few remaining self-cert providers, has announced that it will withdraw from the self-cert market at the end of this week.
David Tweedy, managing director, at Platform, says: ?The FSA Mortgage
Market review paper has shown that continuing to offer self certification mortgages in its current format is unfeasible and after careful deliberation of the paper, Platform has now taken the decision to withdraw from the self certification market.?
Self Certification Mortgages were designed for workers who have trouble proving their income in a conventional manner such as contractors, freelancers, self employed, and company directors.
Many contractors and freelance workers will now be concerned on how they go about securing a mortgage that takes all of their income into consideration once the expensive self-cert option has been removed.
Reading on the Guardian Money forum many contractors are worried about the proposed ban “Banning self-certification might make nice headlines, but where does that leave those of us who are contractors or self employed?” said Lookingbusy
“I’d love to meet one of these people who borrowed irresponsibly on a self-cert mortgage. I’ve had two self-certs in the past and both times I had to provide detailed accounts and bank statements, pretty much what the FSA says it’s now going to insist on. I also paid a whopping rate of interest,” said Zephirine. “Recent trends in business practice mean vast numbers of people ? who would previously have been in long-term employment ? now work on short contracts or are classed as self-employed. Mortgage lending has to take account of this.”
Firstly Contractors need to realise that self-cert mortgages were never the only option, in fact Self-Cert?s are an unnecessary and expensive route for a contractor to take.
Any credible contractor specific mortgage broker would never advise a contract worker to take the Self-Cert route. As long as you have a valid contract in place with an end client they should be able to work with senior underwriters to secure you a mortgage based on your contract rate, thereby taking all of your income into consideration.
Specialist contractor mortgage brokers are able to secure mortgages with high street lenders and at high street rates, giving you access to the same whole of market mortgages that are available to borrowers who are able to prove their income in the traditional way.
This article has been published with permission of Contractor Mortgages Made Easy Contractor Mortgages Made Easy are a whole of market mortgage broker who specialise in securing bespoke Mortgages For Contractors
