View more on these topics

BTL ‘may be the next self-cert’ as borrowers ‘game’ the sector

Lenders fear that buy-to-let could increasingly be used to replace the self-certified sector as borrowers seek to avoid the stricter affordability rules of the Mortgage Market Review.

Under the MMR, which comes into effect on 26 April, lenders are obliged to ensure the borrower can afford their mortgage and must obtain proof of income in all cases, which means that self-cert loans have been banned, although lenders have not offered them for some time.

Residential borrowers will also be subject to a stress test to ensure they can afford their loan if rates rise, so it is likely to be harder to obtain a loan in most cases post-MMR.

Lenders fear that more borrowers will be tempted to “game” buy-to-let – which is unregulated and therefore not subject to the same affordability and income rules as residential mortgages – for what should be a residential mortgage to avoid these stricter affordability rules.

Alan Cleary

Precise Mortgages managing director Alan Cleary believes the gaming of buy-to-let could become a “massive” problem for lenders.

He says: “The reason people game buy-to-let is because they can’t pass the affordability requirements for regulated mortgage contracts. MMR makes that affordability requirement even tougher so I think more people will attempt this.

“It is a market-wide issue but we’re [Precise] on top of it. We don’t want people who are gaming coming to us but we have the systems to hunt these things out. But I’m expecting the number of people attempting this to increase a lot. It could be a massive problem for the industry.”

CHL Mortgages managing director Bob Young believes buy-to-let could become the next self-cert as borrowers seek to game
the sector.

Self-certification loans became known as “liar loans” because borrowers did not have to provide evidence of their income, meaning they could inflate their earnings on the application form.

Young says: “If you go back to 2001-03, I was saying self-cert for the employed is an invitation to defraud; it is ridiculous. I got smacked down for that but I thought it was an absolute disaster and we ended up with liar loans.

“I fear that if we are not careful [about ensuring buy-to-let is not used for residential applications], this could turn out the same.”

In June 2011, former regulator the Financial Services Authority urged buy-to-let lenders to ensure their systems and controls  could not be “gamed” by intermediaries “still looking for self-certification mortgages”.

However, while some lenders are worried about an increase in the gaming of buy-to-let, Mortgages for Business managing director David Whittaker, a buy-to-let specialist broker, believes the checks are in place to weed out this practice.

He says: “I think the checks and balances are probably in place as lenders got quite careful about this 18 months ago.”


Regulator’s away days cost £100k over five years

The FCA has spent almost £100,000 on five away days for board members over the past five years, Mortgage Strategy’s sister title, Money Marketing, can reveal. A freedom of information request submitted by Money Marketing found that the regulator spent £97,975 between 2009 and 2013 on annual two-day board meetings at off-site locations.  The FCA […]

Major estate agents give misleading information on mortgage broker fees

An investigation has found four major estate agents giving out incorrect and misleading information to prospective borrowers on how much it would cost to use a mortgage broker. Mortgage Strategy’s sister publication Money Marketing approached Connells, Countrywide, YourMove and Spicerharrt, posing as a first-time buyer, and asked the estate agents about being referred to a […]



Two items caught my eye – Martin Weale’s claim that the base rate is likely to rise next spring and the number of cash buyers last year

Number of claims firms falls as licences revoked

The Ministry of Justice removed the licences of 200 claims firms during 2013 for flouting its rules. This takes the number of claims businesses operating in the UK to 2,254 at November 2013, down from a peak total of 3,367 in 2011. The figure is made up of about 1,400 personal injury firms and about […]


News and expert analysis straight to your inbox

Sign up
  • Post a comment
  • Mike Snorkins 6th March 2014 at 10:10 am

    ‘Liar’ loans, BTL ‘gaming’: what is this? Financial News for Dummies or Sun readers?


Why register with Mortgage Strategy?

Mortgage Strategy continues to be the market-leading B2B mortgage publication in the UK, and provides trusted, independent insight with the aim of helping, promoting and analysing the latest developments for mortgage professionals.

News & analysis delivered directly to your inbox
Register today to receive our range of news alerts including daily and weekly briefings

Mortgage Strategy Events
Be the first to hear about our industry leading conferences, awards, webinars and more.

Research and insight
Take part in and see the results of Mortgage Strategy's flagship investigations into industry trends.

Have your say
Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

Register now