Self Certification Mortgages

We still get lots of people asking about Self Certification Mortgages. These mortgages are no longer available and unlikely to return.

Self-Certification was designed for people with unusual income sources. Normally, a lender would allow a multiple of a person's salary to determine how much they would lend but with Self-Certification they would allow the applicant to self certify their income - this led to many people making applications to lenders using false income figures.

It is debateable why lenders would allow self certification. Why not allow income from any source to be taken into account as long as it can be proven? Why not allow self employed people to submit one year's accounts instead of three? This would have avoided the temptation to inflate one's income. Maybe it was a way of passing responsibility to the applicant in order to make it easier to distribute the seemingly endless supply of money that we saw in the mid 'noughties' without taking responsibility for the consequences of such reckless lending.

Without doubt, self-certification created many problems; it fuelled a rise in house prices as people were able to borrow more and subsequently pay more to get on the housing ladder.

Anybody that arranged a self certification mortgage with inflated income may find themselves overcommitted when mortgage rates start to increase as they inevitably will. There is also the problem that it will be difficult to switch to a new lender to take advantage of more competitive mortgage deals if real income is not sufficient to meet lending criteria in the absence of self-certification. This may leave many people languishing on expensive standard variable rate after any special rate has come to an end - a rate that has always been higher than the competitive average. Is this what the lender's had in mind all along?