Self-certification borrowers are being targeted by Exclusive Connections with the introduction of the self-cert discounted mortgage.
The self-certification market is made up of borrowers who are self-employed and who would otherwise have difficulty is getting a mortgage because they have trouble in proving how much they earn.
IFAs targeting the self-employed market will find that there has not been any real change in the size of this sector over the past ten years. According to the August 2001 labour market trends report from the Office of National Statistics, the number of self-employed people in the UK fell slightly from 3.22m in 1992 to 3.16m in 2000.
Exclusive Connections has set the mortgage rate for its product at 2 per cent above the Bank of England base rate, with a 1.25 per cent discount for the first two years of the loan. This gives the mortgage an initial rate of 5.75 per cent for loans of up to 90 per cent of valuation. For first-time buyers the most that they can take out is 80 per cent of valuation.
Applicants must be able to prove that they have been at their current business for the past two years. The mortgage is fully portable. The redemption penalty is three months interest during the discounted period.
Based on data from Moneyfacts on August 13, 2001, the most competitive two-year discount self-certification is from The Mortgage Operation. This has a discount of 2.01 per cent for loans of up to 90 per cent of valuation, giving it a payable rate of 4.99 per cent. After the discounted period the mortgage will revert to the underlying rate of 2 per cent above the Bank of England base rate. The Mortgage Operation product is similar to the Exclusive Connections product in that it has a redemption penalty of three months interest in the discounted period and also limits first-time buyers to loans of 80 per cent of valuation.