Building society chief says government must do more before rate rises hurt borrowers
19 February 2004
Yorkshire Building Society's chief executive has attacked the government's watchdog for not doing enough about self-cert mortgage fraud.
Iain Cornish's comments followed the Financial Services Authority's (FSA's) "lukewarm" response to the latest BBC programme condemning certain practices within the self-certification mortgage industry.
He warned that thinly-spread self-cert borrowers will face hard times if interest rates continue to rise.
Mr Cornish said: "People have borrowed seven or 10 times their earnings, they have other debts and there is much less of a safety net [than with other loans].
"People are saying that base rates might be going up, and that represents a significant pressure on people who are mortgaged to the hilt."
Mr Cornish also attacked the FSA for not being firmer with the sector. He said: "The FSA should be taking a tougher line. The FSA said it isn't an issue, but if, as expected, interest rates are going to change it will be too late for the FSA to do anything about it."
The dispute follows the second BBC programme investigating the self-certification mortgages industry, where borrowers are not asked to provide proof of their income. Concerns have risen because of its potential for abuse, with fears that people might lie about their income to get a loan.
The Great Mortgage Fraud alleged brokers suggested people who want to borrow large amounts of money at high multiples should exaggerate their income to get the loan they wanted.
One broker interviewed on the record suggested it would be a perfectly acceptable practice if people could not afford the homes that they wanted. The day before the programme was aired, the FSA issued a statement saying that it considered there was no problem with self-certification mortgages.