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FSA to ban self certificated mortgages

The Financial Services Authority (FSA) has announced plans to ban so-called self certified mortgages which had become very popular prior to the ongoing credit crunch. This is a situation which is set to hit the self-employed more than any other area of the UK economy, many of which have "lumpy" income which had led to a rise in demand for this type of mortgage. However, the situation has changed dramatically over the last two years and there are only a handful of self certified mortgages now available on the market.

At the height of the UK property boom over 50% of new mortgages were of the self certified variety which equates to around 860 mortgage types against just 16 now. It is also worthwhile remembering that because of the "extra risk" associated with self certified mortgages the rate charged by mortgage lenders was in many cases significantly higher than the more traditional varied rate. So what will happen to self-employed mortgage applicants?

These changes by the FSA will see income verified by mortgage companies and will not as such bar self-employed people from the mortgage market, but it will mean that they will need to verify their income before receiving their mortgage advance.

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