On April 26th, brand new mortgage regulation known as the Mortgage Marketing Review (MMR) came into effect which means new borrowing rules for mortgages.
In my opinion, the Financial Conduct Authority (FCA) has worked hard to learn lessons from the credit crunch and the spirit of the review is all about ensuring borrowers don’t get into such a mess in the future.
Mortgage lenders will now have to pay closer attention to applicants spending habits and check everyone’s income in 100% of cases. Banks will be responsible for “Stress Testing” applications to make sure repayments can be met if the interest rate rises three or fourfold.
Interest only mortgages will only be available to people who can prove they have a credible repayment vehicle in place to repay the capital at the end of the loan. Rules regarding mortgages which go beyond people’s retirement ages have been tightened up and the overall theme is… well more cautious lending.
Banks have been gearing up for the new rules, testing systems, tightening up their affordability calculators and generally frightening the life out of Brokers. They have also used MMR as an opportunity to tighten up their Money Laundering Rules and educate brokers on how to wheedle out “soft fraud” cases. I.e., cases where applicants are trying to bend the truth!
The immediate impact will no doubt be that lenders will become slightly less generous with their lending criteria and applicants may have to wait a bit longer for their mortgage offer to arrive (new rules, new systems and staff training all takes time!)
By the time this article is printed, we will be about 5 days in. The last time a new set of rules came in effect was 1st November 2004 – the date the Financial Services Authority took over mortgage regulation. I remember it well. A floppy disk arrived (remember them), which didn’t work, so we all went to the pub!
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