BBC exposes UK sub-prime malpractice

by Gill Montia

Story link: BBC exposes UK sub-prime malpractice

The BBC has been investigating the UK’s sub-prime mortgage market and has found evidence of serious mis-selling.

Journalists working for BBC Radio 4’s File On 4 programme spoke to those on the inside of the industry who admitted that people have been advised to lie about their incomes and take out loans far in excess of what they can afford.

The Financial Services Authority has responded to the BBC’s findings with assurances that it will “crack down on this abuse”

The Authority has already acted in areas where its own investigations have revealed such malpractice.

As a result a number of brokers who have been involved in knowingly overstating the incomes of mortgage applicants, have been banned.

Self-certification mortgages, where borrowers state their income and lenders do not necessarily check the figures, make up half of the entire sub-prime mortgage market in the UK.

Inflating a client’s income has been an easy method for brokers to get a loan agreed and one borrower who took part in the BBC investigation reported that he was advised to double his £25,000 income for his mortgage application.

As a result, he secured a loan of more than eight times his salary but his monthly re-payments took up most of the family’s income, resulting in threats of re-possession.

Estimating the number of such cases is difficult, but campaigners fear the practice has been widespread.