Consumers advised to inflate earnings to get mortgage
October 24, 2007 by admin
Filed under News, News-Mortgages
A recent report has revealed that many consumers in the UK are being advised to lie about their earnings on mortgage applications forms in order to enable them to get a larger loan – one that many cannot realistically afford based on their actual earning as opposed to the inflated amount that they state they earn.
This advice is being given to those that self certify, which means that they state their own income and this is often not checked out or verified by the lender.
A number of industry professionals, such as brokers and advisers, have been found to have been advising consumers to put down that they earn far more than they actually do, and this means that they get a larger mortgage loan. However, it also means that the repayments are far higher, as the lender will have based affordability on the earnings reported on the application form.
One man told investigators that he had managed to get a mortgage for eight times his salary by stating that he earned £50,000 per year as advised to do so by his financial adviser – he was actually earning half of that amount. As a result, stated the consumers, he was left repaying a huge mortgage that takes up the vast majority of his income, and has even had to deal with the threat of repossession through difficulties with affordability.
Campaigners are now urging financial regulators to look into this practice and put a stop to it, as it could add to the problems that have spread from the sub-prime market in the United States, leaving many of those in the sub-prime sector unable to cope with their repayments. The practice came to light following an investigation conducted by the BBC.
Tom Smith
24th October 2007
