Affordability calculations are key to solving the self-cert crisis identified by the recent FSA mystery shopping exercises according to residential lender Mortgages plc.
Mortgages plcs comments follow the findings of an FSA mystery-shopping exercise in which 47 per cent of the 249 reviewed failed to demonstrate that affordability had been appropriately assessed by intermediaries.
Sales and marketing director Peter Beaumont warns that if bad practices continue to be unearthed, self-certification is in danger of disappearing altogether. Mortgages plc is currently piloting its online system due to be launched in early 2006. This will provide brokers with access to products using an affordability calculator or traditional income multiples.
He says: If gross income is the problem, affordability calculators are a potential solution. Borrowers who are unencumbered by large amounts of debts and who have modest living expenses, can usually borrow significantly more using an affordability calculation than traditional income multiples would permit. There is no need for intermediaries to fudge income figures and put their future livelihoods at risk.