Home loan applicants who try to circumvent the stricter restrictions of the New Credit Act and increase the size of their mortgage bonds by falsifying income statements will find the banks are not easily hoodwinked, warns Lanice Steward, MD of Anne Porter Knight Frank.
“The banks have ways of checking up on income statements,” says Steward, “and they have a great deal of data at their disposal. Misrepresentation or overly optimistic unsubstantiated predictions of what you might be earning as a result of bonuses, increases or other benefits are likely to be detected and this can lead to serious problems.”
Steward warns that in the majority of cases the 30% ruling is still being rigorously applied, regardless of what other wealth the applicant might have.
“If you live frugally without high expenses and with minimal exposure to credit risk this can help but you have to be able to prove it because banks in most instances will go by the average expenditure for families in your area. They have accurate profiles on these matters.”
The basic rules for applicants, therefore, says Steward, remains: reduce your credit exposure, get rid of superfluous credit cards, cancel store, dining and club accounts and streamline your commitments to other investment channels like unit trusts, annuities and endowment policies. Above all, adds Steward, pay off and get rid of hire purchase accounts as soon as possible.
“Most estate agents,” said Steward, “appreciate the need for the new Credit Act, especially now that the effects of reckless lending have become clear in the USA. There is, however, a strong feeling that each applicant’s case should be treated on its merits rather than crammed into a straight jacket of rules which, although generally beneficial, can be frustrating and counter-productive when one is dealing with upper income clients.”