Self-cert mortgages climb

Figures show that 28 per cent of new mortgages last year were approved without proof of income.

17:05 28 May 2004

New figures released by the Council of Mortgage Lenders (CML) show that the number of mortgages approved without proof of income accounted for more than 28 per cent of new advances in the second half of last year.

Of these, 12 per cent - twice the number estimated in early 2003 - were advanced to borrowers on a 'self-certified' basis, where an applicant's income is stated but no proof is required, the Financial Review website reports.

Another 16.3 per cent were extended on a 'fast-track' basis, where a simple credit check is done on a potential borrower and then proof of income is waived.

The CML said total 'income non-verified' mortgages accounted for 147 billion - or 19.2 per cent of total mortgage balances - at the end of 2003.

Concerns about self-certification mortgages were raised earlier this year after a BBC television program showed footage of mortgage brokers encouraging prospective borrowers to over-inflate their income on application forms when it is an offence to do so.

Borrowers who qualify for fast-track mortgages often do not realise they have done so. Lenders select those whose credit score is good and who have a good record of making mortgage repayments to cut down on paperwork.

Self-certification loans, however, are sought by borrowers who do not wish to, or cannot, supply proof of income. This may be because they are self-employed, for example.

Mortgage broker David Hollingworth, of London & Country Mortgages, told the Financial Review website: "The danger of fast-track home loans is that they can be tantamount to self-certification."