Homebuyers told not to lie on pay

Don't lie about your income, the FSA says

Homebuyers have been warned by the Financial Services Authority (FSA) not to lie about their income when applying for a self-certification mortgage.

If they do, it said, they risk landing themselves with a criminal record.

Consumers could be committing fraud as well as being left with a loan they cannot afford if they overstate their salary, the FSA warned.

A problem with self-certification mortgages was originally exposed by the BBC's Money Programme in 2003.

The programme found that staff at some branches of the Birmingham Midshires building society and some estate agents were encouraging self-employed mortgage applicants to lie about their earnings.

Lenders usually base the size of a home loan on the amount a borrower earns, often lending no more than three times the client's annual salary.

Fewer cases

The FSA said that since the BBC programme, lenders had tightened up their procedures and were now detecting more fraudulent applications.

A survey earlier this month showed no evidence that mortgage brokers were still systematically letting self-employed borrowers inflate their earnings.

The watchdog carried out a review of 39 small mortgage brokers and a "mystery" shopping exercise at 41 more.

Only three firms advised how clients could lie to obtain bigger home loans.

Nevertheless, the FSA is keen to make homeowners aware that a small number of mortgage brokers are still willing to help borrowers inflate their income.

The FSA is urging consumers to make sure they disclose all financial incomings and outgoings to their broker to enable a correct assessment of how much they can afford.

It has set up a website - called Mortgages Laid Bare - to explain to homebuyers the consequences of overstating their salary and being saddled with a loan they might not be able to afford to pay back.