The Mortgage Market Review - What's it all about and how will the changes affect you?

MMR came about after the financial crisis with the intention of introducing new rules to protect consumers and ensure more responsible mortgage lending.

Officially the new regulations come into effect on April 26th although you might have already experienced the tighter criteria from some high-street banks especially over the last year. If you have been given a decision in principle by a lender but have not completed a full mortgage application before 26th April, you will probably be reassessed when it comes to purchasing and may be rejected if you don't meet the new criteria.

Lenders want to see how well you handle your money before passing you for a loan, which means more paperwork, tougher checks and longer processing time. Some people could find that the amount of borrowing they qualify for will be less than they would have been able to borrow following the old rules.

So what are the key changes you should be aware of?

Tougher affordability tests

A person's income will still come into consideration when deciding borrowing levels but people applying for a mortgage will now be expected to provide much more detailed information on their spending patterns as well.

This tougher testing will cover all monthly payments and household expenditure - anything from childcare and travel costs to how much you spend on clothing, food and leisure activities will be taken into account as well as any existing credit commitments such as credit cards

All income and expenditure will need to be verified - being asked to produce your last 3 months' bank statements, proof of bonuses, overtime and commission as well as proof of deposit will become standard practice, so the self-employed and contractors are likely to be particularly hard-hit by the new rules

Any known future changes such as retirement or redundancy will also now be taken into account. Or if you have moved house or job several times recently you may be asked why

Stress testing will be introduced as a way to see how applicants might manage if interest rates go up

-Interest-only loans will still be available but will only be granted where there is strong justification and a credible strategy for repaying the capital

Longer processing times

The mortgage process will probably take longer as more people will need to go through a qualified advisor to take out a mortgage. This could mean additional interviews and additional initial cost but may also give you access to better deals

Generally more hassle

The standard mortgage application will generally be a more onerous task. Having to fish out details of all your loans is one thing but having to justify how much you spend at the pub and on takeaways is another. It seems the new process wants everything on you up to and including your inside leg measurement.

Our advice

Now more than ever it's vital you get yourself a GOOD mortgage broker. Don't just go straight to your local bank or some non independent broker that you get in the larger corporate estate agents. Having a good broker can be the difference between getting a mortgage or not, buying the home of your dreams or staying trapped where you are. For the price, a good independent 'whole of market' mortgage broker will be one of the best investments you make.

If you'd like us to refer you to one of our approved independent mortgage brokers, leave us a message along with your details in the 'contact us' tab and they'll give you a call.

Published on 12 May 2014

Source Dominic Woodward

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