He says:
"We urgently need industry parameters for advisers and lenders to adhere to, because without these, the industry risks the first real mortgage equivalent of the pension and endowment scandal. Before regulation on self-cert mortgages becomes a reality, the primary buck has to stop with us, the advisers. Affordability is the way forward and we must take the initial responsibility for making proper checks and consider the bigger picture on all matters that could impact on the finances of the client."
For any advisers who may question what checks should be in place, Mark outlines:
1. A mandatory minimum level of interrogation is necessary at the front end of the mortgage process.
2. Collection of all relevant paperwork is a must, which is not always as difficult to obtain as some would make out! If the documents are not available ask yourself the question why?
3. Credit checks can be employed in minutes and a picture very quickly constructed to determine affordability, long before the lender even gets the impending application.
4. There should be a "stress test" for all new borrowers against the potentially higher borrowing rates that might occur during the first few years of the mortgage. A 2% increase in the current level of base rates could translate into a near 50% instalment increase for a number of variable rate, interest-only mortgage borrowers.
5. Variable factors (such as increases in National Insurance and Council Tax) should also be factored into assessments of someone's ability to repay a loan.
6. Until the industry provides firm guidance, use your own affordability test. What is the new commitment vs the present outgoings?
