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Is it fair to penalise the self-employed and ban self certified mortgages?

Over the last few months there has been a concerted campaign to rid the UK mortgage market of so-called "liar's loans" which are in effect self certified mortgages. These are mortgages taken out predominately by the self-employed, who may have income which is difficult to predict. In simple terms they effectively self certify a mortgage agreement by guaranteeing that the income information which they are presenting to the bank or other financial institution is correct and they can afford the repayments in question.

However, the Financial Services Authority [FSA] has confirmed it would like to see an end to self certified mortgages and is looking to introduce new regulations which would force mortgage providers to gain more evidence about income from those in the self-employed arena. There is a feeling that this could significantly reduce funding available for those in the self-employed market and effectively reduce demand for UK property.

While it is easy to see where the FSA is coming from, looking to reduce the risk for both consumers and financial institutions, it is difficult to see what alternatives there are for the self-employed. If they have seasonal work then how would the potential mortgage providers view this and how would they arrive at a decision whether to approve or reject the application?

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