You can no longer get a self certification mortgage from UK lenders because they have been banned.

A loophole means you could still get one from a lender in Europe. However, the Financial Conduct Authority (FCA) has issued a warning about the risks of getting a mortgage from outside the UK.

What are self cert mortgages?

Self certified mortgages let you specify how much you earn when you apply without supplying any documents to prove your income.

They are designed for borrowers who are unable to prove how much they earn. This includes:

  • Self employed people

  • People whose income comes from several different places

  • People with a low basic salary who earn most of their income through commission

Why have they been banned?

Self certification mortgages were banned in the UK in 2011 because of concerns that borrowers were being given mortgages they could not afford. Lenders now have to make sure that borrowers will be able to repay their mortgages.

FCA rules mean that lenders must always run detailed affordability checks with every mortgage application. They have to get proof of your income because the regulations state that lenders "must not accept self-certification of income".

Can you get one from a European lender?

Yes, in theory you could get one from a lender based in Europe. The rules that apply to lenders operating from elsewhere in Europe are less strict, meaning that it will be possible for them to offer self certification mortgages online.

The first company to offer them set up their firm in the Czech Republic but soon reached its lending capacity and had to stop taking applications.

What are the risks?

Using a lender from outside the UK could make losing your home more likely if you are unable to keep up with your mortgage repayments.

This is because your mortgage would not be regulated by the FCA and would come with less protection than one from a UK lender, such as:

  • Rules on being treated fairly if you face financial difficulties and cannot meet your payments

  • Being able to refer any complaints to the Financial Ombudsman Service

  • Help from the FCA if anything goes wrong, because the mortgage would be regulated in the country the lender is based in

  • Compensation from an adviser if they recommended a mortgage you could not afford

There are also restrictions on how a lender based in Europe could contact you. They could only contact you online, meaning you would not be able to phone them or write to them if you needed help or information.

The FCA have issued a warning about self certified mortgages, advising borrowers of their limited protection.

What if you decide to get a self cert mortgage?

Although they have highlighted the lack of protection that comes with self certification mortgages from outside the UK, the FCA recommends that if you do decide to get one you should:

  • Talk to a mortgage adviser that is regulated in the UK

  • Check what protection comes with the mortgage by checking its terms and conditions

  • Check how the provider deals with missed repayments

  • Check what fees they charge

  • Find out who the lender's regulator is