t he self-certification market was worth more than £12bn in 2004 and all the indicators suggest it’s a market which still has a long way to grow.
The UK’s mortgage market is one of the most competitive and sophisticated in the world, and the range of options that are available over the widest possible criteria bears testament to this.
But the true sign of a sophisticated market is not how well it caters for its average clients, but how well it provides for those at the periphery – hence the boom in self-certification.
There are now few reasons – other than sheer affordability – why borrowers in the UK cannot now get access to funding for a house purchase.
Startling growth
Anyone paying attention to the maturing so-called niche markets will have been startled by their growth in recent years.
Buy-to-let is now a mainstream option and the products cater for everyone from the commercial landlord to the private investor.
In the self-certification market there has also been a huge shift in the products available, the perception people have of them and the way they are policed.
The idea of stating an income rather than proving it is no longer considered ‘off-the-wall’ and dangerous and clients are increasingly finding the need to do so, given the more diverse ways in which they are earning their livings.
There have been numerous announcements during this year of lenders enhancing their self-certification product ranges while some have entered the market distributing for others or underwriting products for themselves.
However, the self-cert market has had its problems and these have been well-publicised. What is more important though, is the way it has dealt with them and the confidence that remains in the sector for the role it can fulfil for clients.
Remaining vigilant
Following a review of the market at the end of last year the Financial Services Authority (FSA) said it welcomed improvements mortgage lenders had made in the self-certification market but warned they would have to remain vigilant and ensure systems and contols were regularly reviewed to remain compliant.
The regulator also pointed out that concerns remained over the sales and advice procedures that were in place in the mortgage broking market, although it conceded it had found no evidence to suggest salary inflation was widespread or systematic within the broker industry.
Certainly this is something that lenders are taking very seriously and a good deal of work has gone in to ensuring that unreasonable statements of income are checked and rejected where necessary.
This does not mean that lenders are shying away from true self-certification, but simply ensuring that the market works more effectively for those that really need it and is not abused by those who should not be using it.
A great deal of work is also going into product design and LTVs in the market are becoming more generous.
This is especially true of some of the more experienced lenders in the market who are better positioned to fully understand the risks that self-certification offers and deal with them effectively over the long-term.
In better understanding the risks involved, established market players are now looking at offering self-certification on a wide ranging portfolio of needs including self build and such development will help drive the market and benefit many new borrowers.
The self-certification market has grown considerably in recent years and looks set to continue its development in the years to come.
According to Datamonitor, gross advances for self-certification products totalled £4.4bn in 2000. This had risen to £12.3bn by 2004 and anecdotal evidence suggests the last 18 months have seen similar growth.
Given Datamonitor estimates around six million people in the UK are in an employment position that is suited to a self-certification mortgage, the latent potential in the market remains huge.
As products continue to improve and as an industry we get better at educating clients and utilising all of the options available, the self-certification market presents huge opportunities for borrowers, intermediaries and lenders alike.
