From Simon Chalk
The BBC's The Money Programme last month highlighted the issue of fraudulent mortgage applications. But, as you might expect when you consider some of the dross that comes out of the BBC these days, this seemed to me to be a one-sided and headline-seeking production.
To say that the buoyant housing market is due to self-certification was unbelievably naive. There are several factors that more readily qualify as the culprits, with the first mortgage-related one being pretty low down the pecking order.
First, there is the imbalance between supply and demand. This is the most simple of economic principles and I am surprised that the BBC's so-called expert missed it.
And another notable factor in the surging housing market is the fact that property is currently the hot investment medium. The cool equity market climate and pension scheme uncertainty have combined to drive investors into areas they perceive to be of lower risk – this fuelling the buy-to-let sector in particular.
Unemployment is below one million and this underpins high economic confidence and a low fear factor over possible job loss. Couple that with a low interest rate environment and increased affordability of larger loans and what you have is a competitive mortgage industry able to come up with ever better products.
If lenders have actively encouraged self-cert with clear statements that no evidence of earnings will be sought then I hardly think that they can claim fraud has been perpetrated against them.
Indeed, the self-cert offer implicitly says: “We don't care what you do earn, just be sure that you make the payments on time”.
Personal loans and credit cards at astronomical interest rates have been available for years without any checks as to clients' affordability status.
Mortgage lending is at significantly lower rates and is arguably much lower risk as at least it is secured against something.
Lying is morally reprehensible but the onus ultimately lies with the borrower to ensure repayments are maintained – and with the mortgage intermediary and lender to explain this clearly to be the case.
Mortgage Portfolio Services