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Self-Cert "less risky" than buy to let according to ratings agency DBRS

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https://www.mortgagestrategy.co.uk/self-cert-risk-lower-buy-let-says-rating-agency/

"The risk of self-certified mortgages is overblown and is safer than lending to portfolio landlords and those with county court judgments, according to rating agency DBRS. 

DBRS says it has analysed the performance of different kinds of UK mortgages and found that self-cert loans had an average 19 per cent higher risk score than income-verified loans. 

But it also found that self-cert back books, often seen as risky, were safer than many other sorts of lending"

So, has "self cert" just got a bad reputation or are BTL loans becoming toxic? :-)

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Self Cert in the way they are using it also includes all self-employed loans and contractors - by definition some of that group are less risky than the employed man going into the bank.

I don't think the self cert market is anything like the "even if it doesn't have a pulse" days of 2006....

 

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1 hour ago, suresh786 said:

What is Self Cert. ? 

Does it mean to say Self Employed ?

Self-cert (self certification) is a now largely defunct mortgage product. The borrower would be offered a slightly higher mortgage interest rate and the lender would guarantee that they would accept the borrower's statement of their income and not check it. Proper nutty boom lending, especially as it might also have been part of a mortgage deal that was interest-only and at very high loan to value. Plenty of evidence to suggest that many people overstated their incomes. It allowed banks to set aside prudency on loan to income ratios without doing so explicitly and reflected the fact that they were often intending to securitise these mortgages and sell them on to investors rather than keep them on their own books.

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20 hours ago, DrMartinSanchez said:

It's when the mortgage advisor creates fake payslips in photoshop so you can borrow 20x income.

Ohh didn't know it happens in UK also, thought it only happens in third world countries

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22 hours ago, DrMartinSanchez said:

It's when the mortgage advisor creates fake payslips in photoshop so you can borrow 20x income.

Sort of.

Mr + MRs UKAverage go to a bank to get a mortgage.

Im sorry, you're a household income of ~40k will only get you a mortgage of ~100k.

But the house we want to buy costs 200k.

Well, I can recommend my coworker in the self dept ....

Hi! Lets put 10k each in OT. Yeah Im sure youll get a 10% payrise a year. Lets pencil in an income of 50k each a year. There, simple.

 

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As I understand it, the self cert loans were often packaged up and flogged on to third parties (pension funds etc) allowing the issuing Bank to escape the inevitable fallout of lending to people who blatantly cannot afford to repay the loan. Makes you wonder if the same is happening with BTL loans these days...

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3 hours ago, suresh786 said:

Ohh didn't know it happens in UK also, thought it only happens in third world countries

I remember being utterly shocked watching this BBC Panorama programme about mortgage lending:
http://news.bbc.co.uk/1/hi/programmes/panorama/7034019.stm

This was in 2007.

Quote

With a mortgage worth ten times his income he was even more surprised when his mortgage adviser then got him yet another mortgage for £200,000 from Platform, part of the Britannia Building Society, to buy a second flat in the block so he could enter the buy to let market.

 

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  • 295 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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