Brokers have warned that the FSA’s proposals for a clampdown on self-cert mortgages and more stringent affordability checks could lead to case-by-case underwriting, resulting in higher costs for borrowers.
First Action Finance head of communication Jonathan Cornell says that as affordability criteria gets more complex, lenders will have to assess a lot more individuals on a case-by-case basis.
Cornell says: “If you are starting to look at more complex models, then it is going to get harder and harder and we may end up going back to a system where there are underwriters assessing affordability on a case-by-case basis.”
Mortgageforce managing director Kevin Duffy says banning self-cert is “groundhog day” for the industry and it is going back to the days when each mortgage had to be manually underwritten. He says this will increase the burden of costs on the lender and this may well be fed back to the consumer in the form of higher fees.
He says: “There is no doubt that by kicking self-cert into the long grass, the industry has taken a step backwards. The cost of putting a manual underwriter back into the chain will quite possibly be passed back to the broker and consumer. But it would still be a price worth paying for frustrated customers struggling to get a mortgage.”
Quantum managing director Jonathan Burridge says: “There is a risk that there will be a great deal of money that lenders will need to spend on putting the FSA’s requirements in place and this will ultimately be passed back to the consumer. However, I think it may be reflected in rates rather than fees.”