Lenders fear buy-to-let could become the next self-cert due to a rising number of borrowers looking to avoid stricter affordability rules under the mortgage market review.
The MMR requires lenders to ensure the borrower can afford their mortgage and must get proof of income in all cases. Borrowers will also be subject to a stress test to ensure they can afford their loan if rates rise.
Precise Mortgages managing director Alan Cleary believes the “gaming” of buy-to-let could become a huge problem for lenders.
He says: “The reason people game buy-to-let is because they cannot pass the affordability requirements for regulated mortgage contracts.
“MMR makes that affordability requirement even tougher, so I think more people will attempt this.”
CHL Mortgages managing director Bob Young says: “If you go back to 2001-03 I was saying self-cert for the employed is an invitation to defraud. I got smacked down for that but I thought it was an absolute disaster and we ended up with liar loans. I fear if we are not careful then this could be the same.”
In June 2011, the FSA urged buy-to-let lenders to ensure their systems and controls cannot be gamed by intermediaries “still looking for self-cert mortgages”.
Mortgages for Business managing director David Whittaker says: “We will all be a little more alert to this but hopefully the necessary checks and balances are in place.”