The Mortgage Market Review (or MMR) was a comprehensive investigation of the mortgage market conducted by HM Government after the 2008 Credit Crunch and subsequent worldwide financial crash. It was proposed in 2009 and came into force in 2014.
The changes implemented as a result are directly because of its findings, which concluded that there were too many instances of high-risk lending prior to the 2008 financial crisis. This meant many people were unable to afford their mortgage repayments and further exacerbated the resultant crash. As a result, the mortgage world has toughened up. No more self-certified mortgages (or ‘liar loans’), fewer interest-only mortgages and the requirement for mandatory advice on all mortgage products.
Part of the review requires lenders to implement a financial ‘stress test’. This means that lenders will want to make sure that even if (and when) interest rates rise their borrower will still be able to pay the increased mortgage repayments. In order to do this, they must illustrate that they have sufficient and reliable income, that they have limited borrowings and that their finances are stable and predictable.
Basically, lenders are now required to make an effort to establish the affordability of the mortgage they are granting and they must allow for changes in circumstances, primarily the increased cost of borrowing in the future.
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