Last major seller of self-certification mortgages pulls out

Last major seller of self-certification mortgages pulls out

Controversial self-certification mortgages – dubbed "liar loans" – will effectively become extinct this week after the sector's last remaining significant player today said it was withdrawing from the market.

The announcement from Platform, a division of the Co-operative Bank, came a fortnight after the Financial Services Authority issued a discussion paper that proposed banning self-cert home loans.

These mortgages allow borrowers to verify their own income without proof, such as payslips. They were aimed at the self-employed and freelancers, whose incomes are irregular, but some firms let borrowers inflate their salaries to obtain bigger home loans, and many people on these deals are now in financial difficulty.

The FSA found there was widespread evidence of fraud and a big jump in arrears among self-cert loans. It proposed that all mortgage applications should require the lender to verify income.

Advertisement starts

---

---

Advertisement ends

Platform was the only lender of note still offering these deals after Nationwide's specialist lending arm, The Mortgage Works, pulled out last month. Other leading players such as BM Solutions and Bank of Scotland withdrew earlier this year.

David Tweedy, Platform's managing director, said: "The FSA mortgage market review paper has shown that continuing to offer self-certification mortgages in its current format is unfeasible, and, after careful deliberation of the paper, Platform has now taken the decision to withdraw from the self-certification market."

He said he understood the regulator's concerns on income verification, but added: "We continue to believe the industry must recognise that self-employed people can have different circumstances and may not always be able to provide the normal proof of income documentation required. As a lender which prides itself on financial inclusion, Platform remains committed to supporting self-employed people, and will now work with the sector with a view to developing a new product that meets the FSA's guidelines."

Existing self-cert mortgage holders will not be affected by the decision to pull out on Friday; their accounts "will continue to run as normal".

guardian.co.uk © Guardian News and Media 2009