The Financial Services Authority proposed last week to effectively end self-certification mortgages through its ‘Mortgage Market Review: Responsible Lending’ paper by requiring verification of borrowers’ income in every case. It claimed that income was not verified on 43% of mortgages written in the first quarter of the year.
However, Paragon’s FACT research, a panel-based survey of mortgage brokers, reveals that less than 1% (0.7%) of mortgage brokers’ business in the second quarter of 2010 was made up of self-certification loans.
Self-certification has accounted for a declining proportion of brokers’ business since Paragon introduced the question in FACT in the first quarter of 2007, when self-certification mortgages accounted for 13% of business.
Sub-prime mortgages also account for a significantly lower proportion of business than in the first quarter of 2007, but activity in this market has recovered slightly since the nadir of the second quarter of 2009.
Sub-prime accounted for 7.2% of business during the first three months of 2007 but declined dramatically to the point where it represented just 0.4% of business in the second quarter of last year.
The proportion of sub-prime business has since recovered to 1.8%.
Commenting, John Heron, Paragon Mortgages’ managing director, said: “It is not surprising that the level of both self-cert and sub prime business going through brokers has declined over this period because lenders simply aren’t making the products available.
“Since the onset of the credit crunch, lenders have focused the majority of their available funding on prime residential mortgage customers, meaning that ‘non-conforming’ borrowers are unable to step onto the property ladder.
“Those lenders that do offer self-cert or sub-prime mortgages appear to do so direct rather than through the intermediary market.”
