Lucy Hodge, Director at Vantage Finance, said: “I think given where the industry has come since the financial crisis it’s quite shocking that they would be so bold as to completely circumvent the regulator in this way.

“I would like to think that others will share that view and therefore it won’t set a precedent but either way it is bad publicity for the industry and I hope that nothing further comes of it.

“It’s actually quite unfathomable that a lender can launch overseas catering for UK borrowers with a product set banned in the UK.”

Lucy was reacting to news that self-certification mortgage lender Self Cert, which launched in the UK  last week, ceased lending after seeing higher demand than anticipated.

The firm had managed to avoid Financial Conduct Authority (FCA) regulation by basing itself in the Czech Republic.

However, self-certified mortgages can be a useful product for both lenders and borrowers, providing they are managed in the right way and FCA regulations are adhered to.

Paresh Raja, CEO of Market Financial Solutions, told Bridging & Commercial: “I agree that self-certified mortgages assist in areas where income is not as straight-forward.

“Combined with verification from accountants or lawyers, this works also as a funding solution for lenders with strong backing.

“It is important that the right controls, processes and procedures are set in place with regulatory backing.

“Without this in place such lending can be of high risk because regulation not only protects the lender's business but the consumer as well. 

When contacted by B&C, an FCA spokesperson said: “A firm located in an European Economic Area (EEA) member state can provide a lending service under the Electronic Commerce Directive to UK consumers, but the service has to be provided solely at a distance and on-line.

“This service however, would not be regulated by the FCA and if something went wrong, the FCA is not generally able to intervene, additionally there would be no recourse to the compulsory jurisdiction of the UK’s Financial Ombudsman Service.”

Self Cert claims the FCA and government have stifled competition in self-certification mortgages saying that lenders should be free to make their own decisions on how they lend.

The firm’s ‘About Us’ page says: “Being out in the Czech Republic allows us freedom to make our own lending decisions.

“We are big believers in that we are lending our own money and this should have nothing to do with the government.

“The FCA and UK government have, in our opinion, tried their hardest to prevent competition from entering the market.

“If true competition was allowed in the UK today - several banks would be in real trouble. Competition will always find a way through though.”