Mortgages  

FCA warning on foreign self-cert mortgage loans

FCA warning on foreign self-cert mortgage loans

The FCA has issued a warning for people who may be considering taking out a self-certified mortgage from companies based outside the UK.

It comes after a Czech Republic-based company called Selfcert.co.uk began offering these mortgages to UK consumers.

The FCA said anyone taking out a mortgage offered from outside the UK under the Electronic Commerce Directive (ECD) would lose UK consumer protection benefits such as the right to refer complaints to Fos.

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The regulator said: “Firms providing online services from an establishment in a European Economic Area state other than the UK under the ECD have to comply with the law of that state, rather than with UK regulatory law.

“If anything goes wrong, the responsibility is with the other EEA state’s authorities.

“Even if a regulated mortgage adviser in the UK recommends such a mortgage, you will not be able to get compensation from that adviser if it turns out you cannot afford the mortgage payments. This is because the adviser is not responsible for assessing affordability.”

Selfcert.co.uk launched on 18 January but has since stopped taking applications for “at least three months”.

This is because it is “working through a severe backlog of people that have registered an interest in these products”.

The company offers one single rate for all its customers – 2 per cent above the Bank of England base rate - and will lend up to £500,000 with a maximum LTV of 15 per cent.

However, it will not offer mortgages within the M25 because it is “concerned about possible bubbles in the London property market”.

The FCA has recommended that anyone interested in taking out a mortgage with Selfcert.co.uk or a similar company should talk to a regulated mortgage adviser, request a copy of the terms and conditions, and find out how the firm will deal with borrowers who fall into arrears.

Because the firm is operating in the UK under the ECD, it can only contact customers online, not by telephone or post.

When consumers took out a self-certified mortgage they declared the income in their mortgage application was true, but this is no longer permitted in the UK and firms must check a customer can afford a mortgage, including verifying their income.

From 21 March 2016, all firms offering mortgages in the UK (including EEA firms) will have to comply with the Mortgage Credit Directive, which requires a thorough affordability assessment based on information that has been verified by the lender.