Self Cert MortgagesSelf-certified mortgages
However, one company has found a secret hole and created a creditor that provides self-certified mortgages to UK clients who operate out of the Czech Republic. The bank provides self-certified mortgages calculated at the base rate plus 2%, currently 2.5%. However, the regulatory authorities have denounced the tactic of this new company and issued a warning that the Financial Ombudsman Service does not protect creditors who are dealing with companies that are not under its supervision.
Finally, when you take out a loan, they lend you the cash, right? If you miss out on a payment, or if you contravene other small printed regulations in your policy because you are not covered in the same way as you are used to by a UK borrower, the issue arises.
There is therefore a downside hazard in working with a non-UK creditor. A lot in the medias and mortgages markets have been up in the arms about the launch and pointed to the fact that auto-destruction mortgages were in part to blame both for the creaking of credits as borrowers bloated their revenues and borrower over to keep abreast with soaring house prices. What is more, the mortgages industry has been a very strong one.
In 2014, when the Mortgages Markets Review came into effect, the product was fully prohibited in order to streamline the mortgages markets and safeguard borrower protection. Self-cert.co.uk has its registered office in the Czech Republic and operations there under the supervision of the Czech National Bank. In this way it can avoid having to respect UK rules, but can use the e-commerce directive to offer a credit services to UK customers.
According to the regulations, it must be established in an EEA Member State and must supply the services remotely and on-line. There are too many self-employed borrower foreclosed from the mortgages markets because they have difficulty to prove their earnings. In my view, the step towards a total prohibition of self-cert dealerships in the United Kingdom is pointless.
Quite honestly, it is all too simple to take the fall for the current turmoil when the reality was much more complicated. Naturally, it is quite right that sometimes granting loans was completely priceless and unaccountable, and that involved self-destruction and subprime deals and a mix of both, where borrower with a poor loan record were lent on a self-certified base.
Let us not all do self-destructive business with the same paintbrush. Most self-certified mortgages were and are reasonably priced, although there is proof that the level of backlogs on self-certified mortgages is higher than that on which incomes have been checked. The regulatory authorities clearly had to strengthen the regulations on who can lend what, but that is something other than a total prohibition.
Recall that "no income-proven" credit in 2007 made up over 40% of mortgages, and they were not all about to inflate their earnings! First, it may be more challenging to demonstrate your earning power and your affordable position if you are self-employed. Self-employment is often year on year consistent, but this does not mean that the poor years are a reflection of an applicant's overall affordable status.
In addition, stricter new mortgages regulations, as well as limitations on credit-income ratio, make it more challenging to take out credit across the entire credit mile. Although the objective is to prevent individuals from taking out too much credit, it is also constraining and potentially precludes a large number of self-employed borrower. After all, the self-employed often cut their incomes for taxation reasons, quite lawfully and in accordance with good bookkeeping practices.
However, this makes them less able to pay for a loan on hard copy that they can easily pay for in real life. When you are running a new company or are a private entrepreneur, you may not have enough bank account to meet the needs of a mortgagor. At least two or three years of account will be required for a major mortgages borrower to become a regular source of finance, so that new companies will be forced to become specialist providers who will, for example, provide them with a one-year account mortgages but demand a bonus.
After all, if you are self-employed and take the initiative to work, have kids or become ill, it seriously affects your capacity to obtain a home loan under the present system. It is a particular issue affecting self-employed workers who are on parental leave or who have recently re-entered the labour market.
It is possible that other creditors may choose to go the way of self-cert.co. uk to a self-financed EU mortgages. One thing is certain: the regulatory authority's attitude towards self-certified mortgages will not be changed so quickly. So, if you want a home loan on a self-certified base, it is not an option to go to a UK borrower.