Monday, 19 October 2009
Tougher Scrutiny for Home Loans
When I was running my business, from time to time I would receive a letter from a Building Society advising that a member of staff was applying for a mortgage. The letter would ask for confirmation of employment details such as job title and how long employed. Up until about 10 years ago the letter would ask for confirmation of salary but about then that question stopped. This was because many mortgages were now "self-certified" where the lender relied on the borrowers statement alone about income, which is of course related to ability to pay. It was no surprise to me that this change accompanied the fastest rate of growth in house prices the country has ever seen. In hindsight this was an example of the reckless lending that led to the financial problems just over a year ago and of the lack of control of the FSA in regulating the mortgage market. So I was pleased to read todays announcement of plans for borrowers to once again face a mortgage affordability test and self certification mortages will be banned. Some times appropriate regulation can be the right course since soaring house prices are in no-ones interest in the long term. Read more here.