‘Self-cert’ mortgages offered from companies outside the UK may seem tempting, but you could risk losing your home, consumers have been warned.

The Financial Conduct Authority (FCA) said people who choose to take out a self-certified mortgage offered from outside the UK could lose important consumer protection. 

Controversial self-cert mortgages were banned in the UK by the FCA in 2014.

Originally aimed at self-employed workers who found it difficult to prove their income, there were concerns that the system allowed people to inflate their salaries to get their hands on bigger mortgages.

Last month an online company called Self Cert started taking applications for self-cert mortgages – being based outside the UK means it’s not guided by the FCA.

Self Cert, which launched its site in January, has apparently been flooded with applications

Self Cert’s website declared: “We've had to move out of the UK to bring these products back to the European market but we are sure that they will be welcomed by a significant part of then economy that has - through no fault of its own - found itself out in the cold when it comes to getting on the property ladder.

“Whilst we aim to help as many people as we can, we have to be honest in that unless other lenders follow us - this site won't make any kind of dent in the number of people who want to get on the property ladder and can't because of a lack of official paperwork.”

The company offered a single rate for all customers at 2% above Bank of England base rate, but said it will not lend inside the M25 amid fears over ‘bubbles’ in the London property market.

An update on the site just days later suggested it had been flooded with interest, and it had stopped taking new applications for at least three months while it works through a “severe backlog”.

But the move has sparked a warning from the FCA that said the company will not offer “the protections offered by the UK’s mortgage regime”.

A statement from the watchdog said: “Previously, when consumers took out a self-certified mortgage they self-certified that the income stated in their mortgage application was true.

“Because of the harm caused to consumers in the past, this is no longer permitted in the UK and firms must check a customer can afford a mortgage, including verifying their income in every case.”

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The FCA warned UK consumers that if they take out a mortgage offered from outside the UK under the European Electronic Commerce Directive (ECD), they will have no UK regulatory protection.

“You will lose important UK consumer protection benefits, such as the right to refer complaints to the UK’s Financial Ombudsman Service and to be treated fairly when facing payment difficulties,” it said.

“Under the ECD, firms can only contact customers online, not by telephone or post.

“This means you will not be able to speak to the firm about your mortgage arrangements.”

It said that from 21 March this year, all companies offering mortgages in the UK – including ones based elsewhere in Europe – would have to comply with a European credit directive (ECD) which will require a “thorough affordability assessment based on information that had been verified by the lender”.

You could lose your home if you cannot afford your mortgage payments

The FCA urged consumers who are trying to make a decision to find a regulated mortgage adviser who can give advice on mortgage products from a range of lenders – including those regulated in the UK.

And if you’re still considering using a firm based outside the UK, make sure you find out what protections you’ll have if things go wrong, it said. 

“Remember you will not be protected by UK regulation if things go wrong, and you could lose your home if you cannot afford your mortgage payments.”