The Radio Four programme File On Four reported that a former broker claimed that advisers told home owners to take out bigger loans than they could afford. He claimed that one borrowers’ income was £25,000, but was advised to double it on the application to give him a loan of eight times his salary. As the repayments escalated, he failed to make repayments and has since been threatened with repossession.
The revelations have led to further questions being raised about self-cert mortgages, with half of all non-conforming in this area, where borrowers state their income and lenders do not necessarily check the details.
Alan Lakey, senior partner at Highclere Financial Services, believed it was difficult to prove to what extent this practice permeated the market. He said: “People who cut corners and exaggerate just because they can get away with it are a fundamental problem in any market. One has to be far more cautious and make a valued judgement.”
Chris Cummings, director general of the Association of Mortgage Intermediaries, said: “We do not condone any brokers who encourage consumers to make fraudulent applications. We have produced guidance on self-cert and encourage brokers to carry out due diligence.
“We welcome the action that the regulator has taken in the non-conforming market. The lender should ultimately be lending responsibly and while some do run plausibility tests to check a consumer’s suitability this is not universal.”
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