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Mis-selling can undermine cheap mortgages

Date: Wed, 23 Nov 2005

The mis-selling of home loans could mean that some buyers are missing out on appropriate cheap mortgage deals.

Mortgages plc, the UK residential lender and subsidiary of Merrill Lynch, has concluded that often lenders fail to take account of affordability calculations when selling self-certificated mortgages – meaning that some buyers could find themselves struggling or failing to make repayments.

A recent Financial Services Authority (FSA) report discovered that 47 per cent of a total 249 cases of self-cert mortgage deals failed to prove that affordability have been correctly assessed.

"Although poor record keeping may account for some of the FSA findings, it is also possible that self-cert mortgages are continuing to be inappropriately recommended to employed applicants in a small number of instances, because they enable borrowers to obtain larger loans than they could using traditional income multiples," said Peter Beaumont, sales & marketing director at Mortgages plc.

Mr Beaumont added that brokers' inability to sell self-cert mortgages correctly could mean that the abolition of such products and therefore undermine the opportunity of some buyers to secure a cheap mortgage offer.


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