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Truth will out as City regulator prepares to kill off ‘liar’s loans’
he multibillion-pound self-certification mortgage industry, in which customers are not required to provide proof of income, is set to be banned by the financial regulator.
Dubbed “liar’s loans” by critics, self-cert loans were blamed for playing a large part in the housing bubble and ensuing financial crisis.
The Financial Services Authority (FSA) is effectively planning to kill off self-cert home loans by introducing a rule compelling lenders to insist that customers provide evidence of their income.
The initiative will be part of the FSA’s keenly awaited mortgage review, which will be published early next week. The sweeping report will cover all aspects of the mortgage market and is intended to set the regulatory environment for years to come. The FSA may also regulate mortgages for landlords for the first time.
Experts believe that self-cert accounted for one third of new loans in 2007, or about £100 billion of the £300 billion loans granted that year. Buy-to-let accounts for 12 per cent of all properties, or more than three million homes.
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