Fears increase over self-cert

Borrowers are being handed billions of pounds of home loans by mortgage lenders without having their income verified, according to new figures.

15:00 22 June 2004

Borrowers are being handed billions of pounds of home loans by mortgage lenders without having their income verified, according to new figures.

Housing experts fear consumers are not revealing their true income in order to persuade lenders to give them mortgage deals which they are then unable to manage, in a desperate attempt to get a foot on the property ladder, the Daily Mail newspaper reports. This leaves them at risk of financial ruin if houses prices were to fall.

Figures from the Council of Mortgage Lenders (CML) show that in the second half of last year, almost a third of new gross lending - 42.5 billion - was classed as "income non-verified".

Self-certification loans, where borrowers vouch for their own income, comprise more than 12 per cent. The rest is "fast-track" lending, where borrowers' statements of earnings are not systematically checked.

Non-verified loans have always been offered to a minority of borrowers who do not take home a monthly salary, such as the self-employed.

Alan Steel, of Alan Steel Asset Management, said: "Frankly, these figures beggar belief. It is dangerous lending.

"Some cases will be legitimate, but many will be piling into an overheated housing market and will get their fingers burnt."

City regulator the Financial Services Association (FSA) conducted a review into the self-certified mortgage market earlier this year and concluded that lenders had sufficient controls against fraud.

It is a criminal offence to lie on a mortgage application.