Monthly Archives: June 2015

The mortgage landscape is evolving and changes are being made throughout the industry, from MMR to the impending EU Credit Directive in 2016. Most recently, the Financial Conduct Authority (FCA), the Council of Mortgage Lenders (CML) and Her Majesty’s Revenue and Customs (HMRC) reviewed the online documentation that HMRC produces for its self-employed customers looking to apply for a mortgage.

Following a discussion last year between senior mortgage officials, it was felt that mortgage lenders shouldn’t solely depend on tax calculations (SA302s) because the information provided is just a duplicate of what self-employed customers tell HMRC about their incomes. HMRC does not verify the data and customers can simply change the data and details if they want to. Issues were flagged that relying exclusively on tax calculations is effectively self-certification of income and this was a customer conduct and governance control concern for the industry.

In order to paint an accurate picture of a self-employed customer’s income, it was recognised that the Tax Year Overviews that HMRC asks customers to complete is also a valuable document. The Tax Year Overview shows how much tax the customer has paid towards the tax due on the income reported for the tax return. Both documents play an important role in showing the holistic income of a self-employed individual.

Today, self-employed applicants who provide SA302s as evidence of income will also need to provide Tax Year Overviews for the corresponding tax years to support their application. Some self-employed applicants use an accountant’s certificate as evidence of income, at Santander we have always accepted accountant references from qualified accountants and this will continue.

SA302s and Tax Year Overview information and the necessary forms can be found online at the HMRC website, applicants will need an online account with HMRC and will then be able to print all documentation from the site.

The majority of lenders (over 75% of the market) have adopted this new approach and now ask for Tax Year Overviews.

Bank base rate

Bank base rate is kept at 0.5% for another month,

the Bank also kept the size of its bond-buying stimulus programme unchanged at £375bn.

The decision by the Bank’s Monetary Policy Committee (MPC) comes more than six years after the record low was introduced.

The half-dozen years of ultra-low interest rates have cut savings’ returns, while mortgage borrowers have benefited from lower repayments.

Ultra-low inflation, which turned negative in April at -0.1%, has put on hold expectations about the Bank raising rates in 2015.

Last month, the Bank indicated in its quarterly inflation report that it was likely to raise the cost of borrowing in the middle of next year.

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