Buyers 'lying' on mortgage applications
01 November 2003
According to research carried out by the US investment house Lehman Brothers, one in seven first-time house buyers in the UK may exaggerate their incomes when applying for a self-certification mortgage.
The new analysis, which emerged in the wake of last night's 'Money Programme' shown on BBC2, has raised concerns of a 'disorderly correction' in the housing market, as first-time buyers find themselves priced out of the market.
The research is of growing concern given predictions that the Bank of England's rate-setting monetary policy committee is set to raise interest rates next week by 25 basis points for the first time since 2000.
UK economist at Lehman brothers, Alan Castle, commented: 'When interest rates rise, these borrowers could be facing huge difficulties in meeting their monthly interest payments.'
Making assumptions on the proportion of self-certification mortgages taken by first-time buyers, and comparing this with the 30 per cent of loans taken out by them, Castle reckons one in seven first time buyer mortgages is self-certified, providing some idea of the potential scope of the problem.
Last night's programme suggested that some mortgage advisers and brokers have been urging mortgage applicants to exaggerate their incomes on self-certification mortgages.