A shocking report has revealed that many consumers in the UK are being talked into lying about their income in order to get a larger mortgage – often resulting in them taking on loans that they cannot afford based on their actual income as opposed to their inflated income. The reports claim that a number of financial advisers and brokers are persuading consumers that self certify their income – where the consumers states his or her income and there are no checks carried out – to lie and state that they are earning far more than they actually are.
By doing this consumers are able to get a larger mortgage loan than they would otherwise qualify for. However, this means that the lender is offering far more in terms of income multiples than they normally would simply because the lender is under the impression that the borrower is earning far more than he or she actually is. In some cases applicants are stating that they earn double what they actually do, and are therefore receiving loans that are eight time their actual salary.
Campaigners are now urging the government to look more closely at this practice, as they state that it is fuelling consumer debt levels and will create further turmoil in the financial markets when consumers are no longer able to keep up with repayments on loans based on inflated earnings. This will also lead to an increased number of repossessions at a time when repossession levels are already set to rise as a result of many fixed rate deals coming to an end.
One consumer stated that he was advised to double his salary on his application and was therefore given a loan of eight times his actual salary. He stated that he was struggling to keep up with repayments, spends all of his household income on his mortgage, and could be facing repossession.
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