Money Insider: Extra mortgage checks, what's all the fuss?

New mortgage rules came into force last week, and as a result lenders are now required to undertake a more thorough review of an applicants income and expenditure.

While it may make it harder to get a mortgage in some of the more borderline cases where disposable income is tight, for most people it just means the mortgage interview will take a bit longer than it does now as the lender has more questions it needs to ask.

Sadly some people in the press have taken their usual anti-bank stance and blown the whole matter out of proportion.

The Mortgage Market Review (MMR) was designed to ensure that potential borrowers have the capability to afford their monthly home loan repayments now and also when interest rates rise in the future.

It's nothing more than common sense and something that should have been put in place years ago.

Yes, a few more people may be turned down for a mortgage, but if that prevents them going through the major financial stress and heartache of having their home repossessed a couple of years down the line, surely that's a good thing? Well, it doesn't seem that way, according to some of the recent sensationalist media bleating.

How dare those big nasty banks ask us to spend three hours to go through a mortgage application? After all, we're only asking to borrow a couple of hundred thou over 25 years. Whatever next?

And why should we have to give the lender a full picture of our finances – surely we can just scribble a few numbers down on the back of a fag packet? They should be grateful they have the opportunity to lend to us at all.

Seriously though, the claims of this "outrageous behaviour" is coming from the keyboards of the same people who only a few years ago gave the banks a verbal kicking for reckless lending practices when the financial crisis began to unfold.

It's got to be a better way for mortgage lending. If you dig deep enough at the application stage and get a full and accurate picture of a customer's financial position, it should lead to fewer instances of defaults and bad debts.

It's the right thing to do to decline an application if it's clear affordability will be an issue if interest rates increase by as little as one percentage point, particularly as they are historically very low at the moment and that higher borrowing costs are a distinct possibility in the next 18 months or so.

Yes, I agree it may seem a bit intrusive when a prospective lender asks what you spend on childcare, gambling and nights out, but for some people these things can involve a few hundred pounds a month, so they can have a significant bearing on your ability to service a six-figure mortgage. If the MMR had been in place a decade ago, we wouldn't have the current situation where some people are paying only the interest on their mortgage because that's the only way they could manage to get on the housing ladder.

It might have seemed like a good idea at the time, but there are now thousands of people in a sad predicament where the only way they will clear their debt is if they benefit from an inheritance, sell their home or pass away.

I know the banks have lost the trust of many people due to past mis-selling issues, poor customer service, the closure of branches and excessive executive pay, but I think the MMR is a sensible move for both borrower and lender – and that the banks should be cut some slack on this occasion.

Andrew Hagger is an independent personal finance analyst from www.moneycomms.co.uk

Finacial products from our partners

 

Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: DBA Developer - SQL Server

    £30000 - £35000 per annum: Recruitment Genius: This is an exciting opportunity...

    Recruitment Genius: Customer Service Administrator

    £13000 - £15000 per annum: Recruitment Genius: Are you passionate about custom...

    Recruitment Genius: Dialler Administrator

    £22000 - £25000 per annum: Recruitment Genius: Main purpose: Under the directi...

    Ashdown Group: Contracts Manager - City of London

    £35000 - £37000 per annum + benefits : Ashdown Group: Contracts Manager - City...

    Day In a Page

    Turkey-Kurdish conflict: Obama's deal with Ankara is a betrayal of Syrian Kurds and may not even weaken Isis

    US betrayal of old ally brings limited reward

    Since the accord, the Turks have only waged war on Kurds while no US bomber has used Incirlik airbase, says Patrick Cockburn
    VIPs gather for opening of second Suez Canal - but doubts linger over security

    'A gift from Egypt to the rest of the world'

    VIPs gather for opening of second Suez Canal - but is it really needed?
    Jeremy Corbyn dresses abysmally. That's a great thing because it's genuine

    Jeremy Corbyn dresses abysmally. That's a great thing because it's genuine

    Fashion editor, Alexander Fury, applauds a man who clearly has more important things on his mind
    The male menopause and intimations of mortality

    Aches, pains and an inkling of mortality

    So the male menopause is real, they say, but what would the Victorians, 'old' at 30, think of that, asks DJ Taylor
    Man Booker Prize 2015: Anna Smaill - How can I possibly be on the list with these writers I have idolised?

    'How can I possibly be on the list with these writers I have idolised?'

    Man Booker Prize nominee Anna Smaill on the rise of Kiwi lit
    Bettany Hughes interview: The historian on how Socrates would have solved Greece's problems

    Bettany Hughes interview

    The historian on how Socrates would have solved Greece's problems
    Art of the state: Pyongyang propaganda posters to be exhibited in China

    Art of the state

    Pyongyang propaganda posters to be exhibited in China
    Mildreds and Vanilla Black have given vegetarian food a makeover in new cookbooks

    Vegetarian food gets a makeover

    Long-time vegetarian Holly Williams tries to recreate some of the inventive recipes in Mildreds and Vanilla Black's new cookbooks
    The haunting of Shirley Jackson: Was the gothic author's life really as bleak as her fiction?

    The haunting of Shirley Jackson

    Was the gothic author's life really as bleak as her fiction?
    Bill Granger recipes: Heading off on holiday? Try out our chef's seaside-inspired dishes...

    Bill Granger's seaside-inspired recipes

    These dishes are so easy to make, our chef is almost embarrassed to call them recipes
    Ashes 2015: Tourists are limp, leaderless and distinctly UnAustralian

    Tourists are limp, leaderless and distinctly UnAustralian

    A woefully out-of-form Michael Clarke embodies his team's fragile Ashes campaign, says Michael Calvin
    Blairites be warned, this could be the moment Labour turns into Syriza

    Andrew Grice: Inside Westminster

    Blairites be warned, this could be the moment Labour turns into Syriza
    HMS Victory: The mystery of Britain's worst naval disaster is finally solved - 271 years later

    The mystery of Britain's worst naval disaster is finally solved - 271 years later

    Exclusive: David Keys reveals the research that finally explains why HMS Victory went down with the loss of 1,100 lives
    Survivors of the Nagasaki atomic bomb attack: Japan must not abandon its post-war pacifism

    'I saw people so injured you couldn't tell if they were dead or alive'

    Nagasaki survivors on why Japan must not abandon its post-war pacifism
    Jon Stewart: The voice of Democrats who felt Obama had failed to deliver on his 'Yes We Can' slogan, and the voter he tried hardest to keep onside

    The voter Obama tried hardest to keep onside

    Outgoing The Daily Show host, Jon Stewart, became the voice of Democrats who felt the President had failed to deliver on his ‘Yes We Can’ slogan. Tim Walker charts the ups and downs of their 10-year relationship on screen