Monday, 21 April 2008

Credit tightening

TMW ( The Mortgage Works) continues to tighten criteria today.

Self Cert loans now restricted to 75% LTV

Self Cert now only for self employed

Self Cert now only on a repayment basis

Now - I'm trying to think back to when I last saw criteria like this - must have been 1997 ish.

As a bit of a history lesson - this criteria was how self cert started out. Then lenders got greedy and let the LTV go up to 90%, allowed employed people and allowed interest only mortgages.

Self cert (self certification) was really designed for self employed applicants, because the net profit has little correlation with the actual business drawings.

These self cert loans were exploited by employed and self employed borrowers, lying about their income to obtain a higher loan. Borrowing on an interest only basis to keep the payments affordable.

Good to see normal service resuming from some lenders.

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