The market for self-certification mortgages is expanding rapidly along with the rest of the non-conforming lending market. This is mainly due to a rise in the number of self-employed people in the workforce. It is estimated that around one quarter of the workforce is now self-employed and the number is growing.



Such individuals usually earn enough money to apply for a mortgage, however many do not possess the strict accounting records required to apply through a mainstream lender who will require full proof of income. This is either because they have little need for preparing such accounts or their accounts show a smaller income than they actually make. This most common reason for this is that their incomes may be mitigated for taxation purposes.

Self-certification mortgages ensure that the growing number of self-employed individuals do not miss out on home ownership because of their lack of records. Self-certs were originally designed for exactly this purpose although they are utilised by other workers these days.

One such group is contract workers. More and more people are being offered short-term contracts as they provide a safer structure for employers to hire and fire people based on their performance. This group of workers would find it difficult to apply for a standard mortgage product so self-certs may be suitable for them as well.

There are also an increasing number of individuals who earn at least part of their income on a performance basis such as through commissions and bonuses. These workers may receive an inconsistent amount of money each month which can make their income seem volatile and risky to high-street lenders. Such individuals may actually be employed but their incomes are not steady.

In fact people who make a living through such means may actually earn a substantial amount of money and should therefore not be discriminated against when applying for a mortgage. As a result, self-certification mortgages are also suitable for this type of worker as well as for the self-employed.

Because of this shift in workforce dynamics, lenders have reassessed their lending criteria. Products that offer self-certification of income and flexibility in terms of overpayments are becoming more common. While products regularly come and go on the market there are usually several dozen around that may be suitable for application by most individuals who work but cannot apply for a regular home loan product.

While self-certification mortgages have been subject to some bad press in the past, they are now heavily policed by the Financial Services Authority. Mortgage intermediaries can now be called upon to justify recommending self-certification of income if the borrower also qualifies for a mainstream loan. This increased regulation has lead to self-certification mortgages building a solid reputation within the mortgage industry.

The FSA has also conducted several investigations into the self-cert market, focusing in particular on how and why brokers recommend such products. The FSA has always concluded that while there are a few rule breakers out there the self-cert market on the whole has robust measures in place to ensure they are no mis-sold en masse.