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What drove the pre-MMR non-income verified sales surge?

The Council for Mortgage Lenders claims borrowers, rather than brokers or lenders, drove an increase in non-income verified mortgage sales in the run up to the Mortgage Market Review.

In a keynote speech to the Financial Services Expo last week, FCA head of mortgage policy Lynda Blackwell said lenders had “filled their boots” on non-income verified mortgage sales in months leading to the MMR, which came into effect on 26 April.

Blackwell said product sales data from the second quarter of 2014 showed that some 50,000 mortgages with no income verification were sold, accounting for 20 per cent of all mortgages in that period – up from 16 per cent in Q1.

“Just ahead of the MMR coming into force we saw an increase in the number of mortgages where income wasn’t verified with 20 per cent of mortgage sales in Q2 – that’s around 50,000 mortgages sold without income being verified,” Blackwell said.

“So it looks as if there was a bit of filling of the boots going on before everything was switched off.”

However, a CML spokeswoman says: “Borrowers who sought to obtain income non-verified mortgages may have wished to apply for their mortgage before the new rules took effect, so that they were already in the application pipeline.

“It would hardly be surprising if borrowers with more complex sources of income may have anticipated greater difficulty in being able to meet the income verification hurdles after the new rules took effect. That is not necessarily the same thing as lenders actively seeking to increase their business volumes in the sector in advance of the new rules.”

Perception Finance managing director David Sheppard says a lack of awareness among consumers about the changes means the industry is likely to have played a part in encouraging borrowers to take out non-income verified mortgages.

“Research from various sources has shown borrowers were largely unaware of the impact the MMR would have on their options, so to say it was borrowers that led the boost in non-income verified sales just before the MMR hit seems to me a bit tenuous,” he says.

”I think it is probably safe to say that brokers would have been advising particular clients who were suitable for such loans to get them done before they could no longer do so. Lenders will also undoubtedly have pushed a greater proportion through before the doors closed but in my opinion, that was always inevitable.”

Your Mortgage Decision director Dominik Lipnicki adds: “The figures do not lie but brokers and lender did what anyone would naturally do – make the most of a particular kind of product before it is no longer available.

“Brokers will account for much of this but we must bear in mind that a lot of brokers did ask for background information even on fast-track and self-certified mortgages that do not require income verification. They were just quicker to process and as a result some clients will have benefitted from getting those mortgage applications in before they were no longer able to do so.”

Start Financial Services manager Tom Cleary argues non-income verified mortgages served a vital role for certain clients where used responsibly.

He says: “I can definitely see the sense in saying no more to non-income verified mortgages because it does give a way in for some borrowers who are looking to game the market and get a loan they shouldn’t be given.

“But these products were available and if, as brokers, you get a client who does need to get a loan through quicker than normally possible and you know they are actually suitable for the loan, of course you’ll get that through before the door closes.”


In numbers

– 50,000: number of non-inbcome verified mortgages sold in Q2

– 20%: proportion of total mortgage sales account for by non-income verified loans in Q2

– 16%: proportion of total mortgage sales account for by non-income verified loans in Q1

– 26 April: Date the MMR came into force


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