Liars’ loans may be banned and buy to let regulation
Liar’s loans, or more accurately “self-certificated mortgages” were enormously popular before the credit crunch. The idea was that self employed people could not easily provide evidence of their income and their ability to meet the mortgage payments so the lenders relaxed their normal requirements and allowed them to self -certify.
The idea mushroomed and in 2007 as many as one thirds of all new loans were taken out on this basis. Inevitably some people were unduly optimistic about their earning potential and others simply lied. Defaults on this type of lending have been higher than average and they are now very difficult to come by. The FSA is talking about requiring lenders to obtain proper evidence of applicants’ income and this would be the final nail in the coffin.
The FSA is also considering regulating buy to let landlords. This could mean more paperwork for landlords and is hardly going to encourage new investors to enter the buy to let property sector.
What do you think – are these mortgage products suitable or were the banks just too keen to lend?
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