Building Society calls for tougher mortgage rules
17 February 2004
One of Britain's biggest lenders has termed mortgage deals that allow people to sign up without having to prove their income as "an accident waiting to happen".
Yorkshire Building Society is urging the Financial Services Authority (FSA) to bring in tougher rules for self-certification mortgages when it starts policing home loans this autumn.
Its comments follow revelations on the BBC's Money Programme that some home buyers are being encouraged by mortgage brokers to lie about their incomes to get on the housing ladder.
Self-certification home loans allow borrowers to estimate their income without having to supply documentation such as wage slips.
Yorkshire boss Iain Cornish said it had lent about £6 million worth of these loans last year, but added that it ended up checking the incomes of about half of the cases.
Mr Cornish said he believed this type of loan could be "an accident waiting to happen in terms of borrowers and lenders becoming unstuck".
"If interest rates go up and people have borrowed several multiples of their income, it will not take that much before people are exposed to that," he told The Guardian.
The building society said it's cautious approach had paid off, with "bog standard" residential mortgages helping to reel in £2.8 billion in revenue. It added that the number of people behind with their mortgage payments had fallen to a new low.