IT contractors aghast as FSA evicts self-cert mortgages
Self-employed to live in old computer boxes
IT contractors could be forced to live in HP's excess packaging if the government adopts Financial Services Authority proposals to scrap self-certification mortgages.
Over a year after the property boom popped and the UK's financial sector had to be bailed out by the government, the financial regulator has proposed a raft of measures to stop that particular type of crisis happening again.
One of the proposals is "Banning ‘self-cert’ mortgages through required verification of borrowers’ income". The organisation believes self-cert deals were expanded beyond the intended market and typically result in higher borrowings and are more prone to fall into arrears.
Others proposals include affordability tests for all mortgages, banning certain "toxic combinations of characteristics that put borrowers at risk" and making all mortgage advisors answerable to the FSA.
Other measures, designed to protect borrowers, include ensuring firms do not "profit" from people in arrears.
“The FSA needs to ensure that firms only lend to people who can afford to pay the money back. The reforms that we have announced today will ensure that the mortgage market works better for consumers and that it is sustainable for firms,” the organisation said.
However, the proposals on self-cert mortgages would have an immediate effect on contractors, particularly those who have only recently become self-employed - as a result of the financial crisis, for example.
Income certification typically requires three years of audited accounts, something that will be difficult for recent entrants to the contractor industry to produce. Even then, contractors will typically be hit with a lower loan to value ratio and a higher interest rate.
One poster to sometime Reg contributor Tim Worstall's blog on matters economic said: "It is only because the governments bailed out the banks that they feel the need or the ability to interfere with basic market decisions like this. What’s next? They’re only allowed to lend to public sector workers?"
Well, since the government took over the banks, arguably most of us are public sector workers one way or another now.
Another added, "Oh Timmy, we can’t have all these NASTY self-employed people having mortgages and houses, can we? After all, they are not dependant on the State and are therefore hard to control. Besides, they are all tax-dodgers; doesn’t that nice Mr Murphy say so?" ®
A tale of two ACs
13:58 vs 17:52, Peston vs Stalin, no less.
To all of those smugly saying 'if you don't have enough deposit, wait three years' - consider first time buyers, already appalled at the sheds they could barely afford, who watched a market that had been running away at 20% for the previous three years and showed no sign of slowing. If your unequivocal advice to them was to hold back, you could have consigned them to the suburbs before they even had a chance. With property being most people's biggest asset, that could have been a dreadful move.
Of course, it should be down to the bright young things to convince banks to lend to them against their better judgement, and not to have 125% handed over on a stick, but over-regulation is the Daily Fail response.
Advise away, armchair folk, with your nieces and nephews safely holed up in Slough.
Cough up at 25% of the house value and bank will lend you any amount you want, as any loan to you is insured to 75% of its value. They know you are serious getting your wodge out and accepting part of the risk and they are covered for the rest.
Outside of this it is up to them. Though halariously they often will not lend even when the monthly payments would be lower than you renting in an equivilent property and you as sure as hang going to find the cash to pay the rent so go figure.
Could be worse...
.... in Germany, you can only borrow a max of 50% of a house's value . And you're lucky if you get even that! Credit card? forget it! could take years....