Money Insider: Extra mortgage checks, what's all the fuss?
Saturday 03 May 2014
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
Independent Partners: Get fee-free expert mortgage advice and find the right mortgage deal for you.
Pension mortgages: 'The advice I was given was wrong and now I face losing my home'
You'll need £220,000 for a minimum wage in your retirement
Questions of Cash: I checked in with Air France in time and still missed the plane
Minister's pension promise to firefighters challenged
Mark Dampier: Maybe boom, maybe bust, but we'll probably just muddle along
- 1 Planes go hybrid-electric in important step to greener flight
- 2 Antonio Martin shooting: Police and protesters clash over teenager's death just five miles from Ferguson, Missouri
- 3 Northern Lights above Britain: Stunning Aurora Borealis illuminates Northumberland sky on Christmas Eve
- 4 British actor Idris Elba cannot star as James Bond because he is black, says shock jock Rush Limbaugh
- 5 New route to Mars could make manned mission much cheaper and easier
Nigel Farage defends Kerry Smith 'ch***y' comment: 'If you are going for a Chinese, what do you say you’re going for?'
British actor Idris Elba cannot star as James Bond because he is black, says shock jock Rush Limbaugh
Rozanne Duncan: Ukip expels councillor for 'jaw-dropping' comments made in BBC TV interview
Germany anti-Islam protests: 17,000 march on Dresden against 'Islamification of the West'
Ukip member gets into Christmas spirit with Union Flag plea to Santa 'for our country back'
Panic Saturday: 13 million Britons spend £1.2bn – while 13 million others across the country live in poverty unable to afford food
iJobs Money & Business
Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...
£43500 per annum + pension + holidays: The Jenrick Group: Night Shift Operatio...
£20000 - £25000 per annum + OTE £40,000 + Car + Pension: SThree: SThree are a ...
£20000 - £25000 per annum + OTE £35K: SThree: We consistently strive to be the...
Day In a Page
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
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