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Return of the liar loans: UK firms setting up in Eastern Europe offer high-risk mortgages that do not require borrowers to prove what they earn
Published: 00:06, 18 November 2015 | Updated: 08:34, 18 November 2015
Lenders are exploiting a legal loophole by offering high-risk mortgages that allow homebuyers to get a loan without having to prove what they earn.
Money Mail can reveal how British businesses are setting up in Eastern European nations such as Estonia as a way of skirting around tough UK laws on lending money.
From January, Selfcert.co.uk, which has been founded by a British businessman in an unnamed Eastern European country, will offer self-certification mortgages to UK borrowers.
These types of deals, where the homebuyer’s income is not checked by a bank, were dubbed ‘liar loans’ following the banking crisis because borrowers fibbed about how much they earned in order to get a bigger mortgage.
High risk: Deal in which homebuyer’s income is not checked by a bank, were dubbed ‘liar loans’ following the banking crisis because borrowers fibbed about how much they earned in order to get a bigger mortgage
Today, these deals are effectively banned in the UK by the City watchdog, the Financial Conduct Authority (FCA), but 36-year-old Graeme Wingate, who owns Selfcert.co.uk, says EU rules allow financial institutions in other nations to offer their products to consumers in the UK without applying for permission from the British regulator.
The only condition is that the company must pass the lending rules of the country in which it has based itself. It is also not allowed to have a property or a branch in the UK.
Selfcert.co.uk will not be the first firm to get around the rules this way. Some peer-to-peer lending firms, which act as middle men between savers and companies that want to borrow money, are already based in Estonia but offer deals here.