The Mortgage Market Review (MMR) – Its going to be harder to get a Mortgage find out why?
We have been receiving newsfeeds from the lending community on a daily basis on their progress on the implementation of new underwriting steps for MMR. Some will inevitability leave it to the last minute others look set to launch their new platforms imminently. My advice is apply as soon as you can, particularly if you are looking to borrow the maximum.
What was the MMR?
The MMR was a comprehensive review of the mortgage market, which started with a Discussion Paper in 2009 and culminated in a Policy Statement and final rules in October 2012. All policy papers are listed at the bottom of the page
How will this effect new Mortgage applications
First of all these will affect only regulated activities such as residential mortgages. The MMR rules do not directly affect buy to let and commercial mortgages. However there is going to be a change on secured loan mortgages that are taken on residential homes which will now also fall under the FCA remit.
Currently mortgage brokers are responsible for assessing the applicant’s affordability. After MMR Lenders will be fully responsible for assessing whether the customer can afford the loan, and they will have to verify the customer’s income. They can still choose to use intermediaries in this process, but lenders will remain responsible. What this will mean is great amount of emphasis will be put on the applicant’s affordability.
This has led to many lenders changing their affordability models which means greater emphasis is put on affordability rather than income multiples.
Basically the lender now have ultimate responsibility for not only ensuring the mortgages affordable currently but throughout the term of the mortgage which means they will stress test rates not on the historically low interest rates there are currently offered in the market but at a more standardised rates. These changes will also affect affordability into retirement.
Underwriting changes and extra documentation
Lenders will also require greater clarification around the applicant’s income and expenditure so expect a lot more questions around how and when you get paid and what you spend your money on. We have already seen major lenders overhaul their requirements especially within the self-employed arena with HMRC tax return documents needing to be produced by the tax office. As mentioned before lending into retirement as well as interest only mortgages will be under further scrutiny by lenders.
Who is going to feel the changes most?
Criteria has been changing over the last year to accommodate MMR with many of the main lenders having incorporated key underwriting requirements over the last 12 months. It is the belief that the changes to affordability will hit the London and South East buyers the most as the property prices are high.
Niche Advice belongs to a compliance monitoring network which helps us get prepared for MMR and are fully up and running with the requirements needed post April 26. We strongly believe that obtaining full and independent advice will allow you to obtain the best mortgages on Offer pre and post 26 April.
For more information on mortgages please contact us on 020 7993 2044 or alternatively complete the online enquiry form on the right-hand side of this page
Payam Azadi is a partner at Niche Advice Ltd who are Independent Financial and Mortgage Advisers in London.