Self-certification mortgages, commonly known as “self-cert” mortgages, were once a popular choice in the UK mortgage market, especially among self-employed individuals, freelancers, contractors, and those with variable income. However, these products no longer exist in the UK due to regulatory changes aimed at ensuring responsible lending practices.

The End of Self-Cert Mortgages in the UK

1. Regulatory Changes: The disappearance of self-cert mortgages from the UK market was primarily due to regulatory changes implemented following the financial crisis of 2007-2008. The Financial Conduct Authority (FCA) introduced stricter lending criteria to prevent borrowers from taking on loans they couldn’t afford.
2. Risk Factors: Self-cert mortgages allowed borrowers to self-certify their income without providing concrete evidence, such as payslips or accounts. This lack of verification posed significant risks, as it could lead to borrowers overstating their income to obtain larger loans, thereby increasing the risk of defaults.

Alternatives: Contractor, Freelance, and Locum Mortgages

With the absence of self-cert mortgages, the focus has shifted to safer and more reliable mortgage products tailored for those with non-traditional income patterns, such as contractors, freelancers, and locum workers.

1. Income Verification: Unlike self-cert mortgages, these modern mortgage options require proof of income. Lenders may look at a contractor’s day rate, a freelancer’s average income over a few years, or a locum’s various assignments to assess affordability.
2. Stress Testing: These mortgages are subject to stress testing to ensure borrowers can afford repayments even if interest rates rise. This practice is part of responsible lending criteria set by the FCA.
3. Specialized Lenders: Many lenders now specialize in providing mortgages to self-employed individuals and those with variable incomes. They use more nuanced approaches to assess income and affordability, considering the unique circumstances of each applicant.
4. Broker Assistance: Working with a mortgage broker can be beneficial for freelancers, contractors, and locums. Brokers can help navigate the market, identify lenders who are sympathetic to non-standard income types, and provide advice on the necessary documentation.

While self-cert mortgages are no longer available in the UK, the mortgage market has adapted to offer more secure and reliable options for those with non-traditional income sources. These modern mortgage solutions are designed to assess borrowers’ affordability more accurately, reducing the risk for both the lender and the borrower. It’s crucial for potential buyers in these categories to seek advice from knowledgeable brokers and explore mortgage products specifically designed for their unique financial situations.