Ban for self-certification mortgages to be introduced

The Chairman of the Financial Services Authority (FSA) has announced plans to go ahead with banning self-certification mortgages.  This follows a review of the mortgage market in the UK by the FSA which found that 46% of households have no money left, or even a shortfall, after paying their mortgages and living costs. 

Self-certification mortgages are those in which borrowers state their income without having to actually prove it.  They are often taken out by the self-employed and those who have difficulty proving their income.

Scott Kennerley, Money Advice Project Manager said:  “A mortgage is usually a large, long-term financial commitment and to provide this kind of financial service without verifying a person’s ability to repay has the potential to be problematic for many people.  We welcome any moves by the finance industry to ensure that borrowing is more closely linked to the ability to repay.”

During the year April 2009 - March 2010 the Dealing with Debt Service operated by Citizens Advice helped over 2,500 clients deal with over £33 million of debt in Northern Ireland. This is an increase of 7% on the previous year and continues a four year upward trend since the service began.  

Figures from the Dealing with Debt Service show that mortgage debt increased from 3% of the total debt handled by the service in 2006/07 to 16.53% of the total debt in 2009/10.  The actual amount of mortgage arrears debt has also risen over the same period to almost £5.5 million. The amount of mortgage debt handled by Dealing with Debt advisers has increased by over 1000% in the four years that the service has been running.