top stories
Proposed new mortgage rules – will they deter entrepreneurs? asks ACCA
Proposals for major reforms in the UK mortgage market announced by the Financial Services Authority (FSA) will help improve risk management practices among mortgage lenders and could help reduce mortgage fraud, but they could have serious implications for many would-be entrepreneurs, says ACCA (the Association of Chartered Certified Accountants) today.
John Davies, head of business law at ACCA, says: ‘The FSA has said that their reforms are aimed at ensuring the mortgage market works better for consumers and is sustainable for all market participants.
‘One of the suggested changes is to ban ‘self-cert’ mortgages through required verification of borrowers’ income. This means that many would-be entrepreneurs or those just starting out as self-employed could find it difficult to get a mortgage as they may not be in a position to prove their income.
‘Self-employed applicants can help themselves by keeping meticulous records of their income and outgoings, but they will always be in an inferior position to those on regular incomes as regards giving an indication of their future earnings capacity. It is right that lenders tighten up their procedures, but this needs to be done in a way which does not discriminate and does not put off individuals from starting up in business by themselves.’
ACCA believes that the responsibility should always be on the lender to check and verify someone’s ability to repay a mortgage. This is simply good risk management.
While ACCA believes that a proposed affordability test for all mortgages is sensible, the global accountancy body is concerned that future entrepreneurs will be reluctant to take the plunge.
John Davies concludes: ‘Mortgages are inherently risky, but the situation whereby lenders lend on the strength of exaggerated claims about income can only in the end in problems on both sides. It is right that reasonable controls on mortgage advances are introduced. But the promised changes on self-cert mortgages must take into account the potential consequences for entrepreneurs and potential entrepreneurs and ensure that those in this vital sector of the economy are treated fairly.’
For further information please contact:
Helen Thompson, ACCA Newsroom +44 (0)20 7059 5759 +44 (0)7725 498654 helen.thompson@accaglobal.com