New mortgage rules: Two-hour quiz for borrowers as loan regulations come in
If you're looking for a mortgage, be prepared for a lengthy interrogation about your finances, says Simon Read
Saturday 03 May 2014
A clampdown on mortgage lenders means that anyone hoping to borrow from today faces a major grilling about their finances.
Lenders are being forced by the City watchdog to ensure that any potential borrowers can afford to repay their home loan now and could also meet repayments if interest rates should rise.
The so-called stress test – which forms a key part of the Financial Conduct Authority's new mortgage regulations – will mean ensuring that borrowers can cope easily with a rise of 1 per cent in rates.
The rules are long overdue and should ensure no return to the disastrous mortgage boom of the last decade when many lenders ignored affordability rules and instead relied on soaring property prices bailing struggling borrowers out.
The regulator wants to avoid a repeat of that toxic-loan period which led to the collapse of former major lenders such as Northern Rock and Bradford & Bingley.
But those applying for a loan now could face hours of questioning and will be expected to supply detailed evidence of their income and, crucially, their outgoings.
But that doesn't necessarily mean it will be tougher to get a loan, as lenders will still want to do business.
Paul Broadhead of the Building Societies Association said: "It is understandable that people are concerned about the changes. However, it is vital that the new regime does not dent consumer confidence.
"The mortgage market review was introduced to ensure a common-sense approach to mortgage lending by all lenders and that people are not borrowing more than they can afford to pay.
"A number of building societies implemented the process early and have been lending this way, without problems, for a number of weeks. In fact, the common-sense approach has been taken for years."
However, to increase the chance of being granted a loan, experts suggest cutting back on spending before you apply.
Adrian Anderson, director of mortgage broker Anderson Harris, advised: "Cut back for three months before applying for a mortgage: pay off debts and simply spend less.
"In the past, borrowers reined back their spending once they had a mortgage and had to pay it each month; now you should act as though you already have that commitment in place and reduce your spending accordingly."
Newcastle winger reveals he has testicular cancer - and is losing his trademark long hair as a result
Actors star in Woody Allen's 'Magic in the Moonlight'
Human faces unique 'because we don't recognise each other by smell'
Man's attempt to avoid being impounded heavily criticised
- 1 Scottish independence: Ireland since 1919 is a lesson for Scotland in what a Yes vote means
- 2 A bottle of wine a day is not bad for you and abstaining is worse than drinking, scientist claims
- 3 Say yes to 'no-poo': It's been three years since I stopped washing my hair
- 4 Grandmas keep accidentally tagging themselves as Grandmaster Flash on Facebook
- 5 Daniele Watts: Django Unchained actress detained by Los Angeles police after being mistaken for a prostitute
Daniele Watts: Django Unchained actress detained by Los Angeles police after being mistaken for a prostitute
The political class is doing what Hitler couldn’t – destroying Britain
Scottish independence referendum: A nation divided against itself
Scottish independence: Nationalist leader Jim Sillars threatens pro-union companies with 'day of reckoning' after independence
Scottish independence: Yes campaign feels the heat as Alex Salmond's NHS claims come under furious attack
Portuguese academic says British are 'filthy, violent and drunk'
iJobs Money & Business
£18000 - £23000 per annum + Commission: SThree: Real Staffing are currently lo...
£20000 - £25000 per annum + OTE £35,000 first year: SThree: The SThree group i...
£20 - 24k (Uncapped Commission - £35k Year 1 OTE): Guru Careers: We are seekin...
£20 - 24k + Benefits: Guru Careers: This is a great opportunity for an enthusi...
Day In a Page
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize
A three-bedroom red-brick cottage with outbuildings and pretty gardens, £200,000
This three-bedroom flat within a former textile factory spans the corner of the fourth floor and has a balcony