Self Certified Mortgages a no no For Contractors
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This lunchtime The Bank of England once again held the base rate at 0.50%. This was widely expected by analysts as the Bank, The Treasury and the Financial Services Authority (FSA) try to speed up the economic recovery.
Back in October last year the FSA announced plans to ban self-certification mortgages in an attempt to ensure that all borrowers prove their ability to repay in advance.
This week, industry trade body The Council of Mortgage Lenders (CML) spoke out on behalf of lenders claiming that a ban on so-called "liar loans" and other controversial mortgage lending practices would backfire and have harmful long-term consequences.
The CML is asking the FSA to hold fire on plans to clamp down, arguing that the home loans market had "corrected itself" and there would be no return to the excesses of the past.
Self-certification mortgages were originally aimed at the self-employed and freelance/contract workers who had trouble proving their income.
In its response to the FSA, the CML said many of the problems of the past had been corrected by mortgage firms anyway following a rise in losses and fraud, while self-cert deals had disappeared in response to public criticism. Borrowers, too, were taking a more responsible approach.
The CML have admitted that the case for self-cert mortgages is weak, given the higher level of arrears associated with them and the scale of past abuses.
CML argue that borrowers who might be perfectly capable of running a mortgage but may find it difficult to prove their income could include self-employed people who had recently launched a business
but had yet to submit formal accounts; sole traders, contractors, and freelance workers.
Taj Kang, Associate Director at Contractor Mortgages Made Easy (CMME) commented “The fact that so many self-cert mortgages were granted to employed workers who could prove their income, and the high level of arrears associated with these types of loans shows that self-certification mortgages were being abused by both individuals and brokers. At CMME, we wouldn’t advise a professional Contractor or Freelancer to go down the self-certification route; if you approach a specialist contractor mortgage broker then they should be able to secure you a competitive mortgage that is based upon appropriate evidence of income”
“It is the opinion of CMME that the FSA should stand by their proposals to tighten up the lending criteria, as any contractor or freelancer that can adequately afford a mortgage should have no need to go down the more expensive self-cert route to secure borrowing”
The Contract jobs market in the UK showed another month of growth in January with the second highest number of jobs on a temporary or contract basis since August 2009.
The financial sector seems to be the strongest for IT Contractors so far in 2010. It seems many financial companies cut back staff during the recession and now need to plug the gaps.
Findings from Powerchex, which vets IT contractors for banks, reveal that IT contractor job offers from financial services have indeed picked up steadily since the third quarter last year.
Philip Fanthom, managing director of Jenrick IT, stated “We have noted an unprecedented increase in demand for contract IT staff. We are well ahead of forecast…and we have also seen a welcome return of permanent vacancies”.
Back in October last year the FSA announced plans to ban self-certification mortgages in an attempt to ensure that all borrowers prove their ability to repay in advance.
This week, industry trade body The Council of Mortgage Lenders (CML) spoke out on behalf of lenders claiming that a ban on so-called "liar loans" and other controversial mortgage lending practices would backfire and have harmful long-term consequences.
The CML is asking the FSA to hold fire on plans to clamp down, arguing that the home loans market had "corrected itself" and there would be no return to the excesses of the past.
Self-certification mortgages were originally aimed at the self-employed and freelance/contract workers who had trouble proving their income.
In its response to the FSA, the CML said many of the problems of the past had been corrected by mortgage firms anyway following a rise in losses and fraud, while self-cert deals had disappeared in response to public criticism. Borrowers, too, were taking a more responsible approach.
The CML have admitted that the case for self-cert mortgages is weak, given the higher level of arrears associated with them and the scale of past abuses.
CML argue that borrowers who might be perfectly capable of running a mortgage but may find it difficult to prove their income could include self-employed people who had recently launched a business
Taj Kang, Associate Director at Contractor Mortgages Made Easy (CMME) commented “The fact that so many self-cert mortgages were granted to employed workers who could prove their income, and the high level of arrears associated with these types of loans shows that self-certification mortgages were being abused by both individuals and brokers. At CMME, we wouldn’t advise a professional Contractor or Freelancer to go down the self-certification route; if you approach a specialist contractor mortgage broker then they should be able to secure you a competitive mortgage that is based upon appropriate evidence of income”
“It is the opinion of CMME that the FSA should stand by their proposals to tighten up the lending criteria, as any contractor or freelancer that can adequately afford a mortgage should have no need to go down the more expensive self-cert route to secure borrowing”
The Contract jobs market in the UK showed another month of growth in January with the second highest number of jobs on a temporary or contract basis since August 2009.
The financial sector seems to be the strongest for IT Contractors so far in 2010. It seems many financial companies cut back staff during the recession and now need to plug the gaps.
Findings from Powerchex, which vets IT contractors for banks, reveal that IT contractor job offers from financial services have indeed picked up steadily since the third quarter last year.
Philip Fanthom, managing director of Jenrick IT, stated “We have noted an unprecedented increase in demand for contract IT staff. We are well ahead of forecast…and we have also seen a welcome return of permanent vacancies”.
Written by Taj Kang
This article has been published with permission of Contractor Mortgages Made Easy Contractor Mortgages Made Easy are a whole of market mortgage broker who specialise in securing bespoke Mortgages For Contractors
