How will new mortgage rules affect potential homebuyers?

Mortgage Market Review rules will mean changes to the application process

Homehunters are becoming more concerned over their chances of putting together a deposit and getting a mortgage, according to new figures from the Building Societies Association.

Its survey indicates that 63 per cent of people are worried about deposits, the highest for two years. Just under a third are also mindful of the effects of possible interest rate rises - 14 per cent say that a one per cent rise would make mortgage repayments  difficult, although 42 per cent say that they would not be badly affected.

"The new lending rules, known as the Mortgage Market Review will be introduced on 26 April, and some lenders have already begun to implement these rules," said BSA Head of Mortgage Policy Paul Broadhead. "The process of getting a mortgage is changing, but borrowers should not be put off by the new regime.

"All applicants, bar a very few specific groups, will receive mortgage advice. While this means that the mortgage application process will take longer than before, consumers will benefit from the advice on what is probably the biggest purchase of their lives. Similarly applicants should expect to provide more details of their income and expenditure.

"A new feature is the requirement for a lender not only to establish that a borrower can afford the loan at the current interest rate, but also if the rate were to rise. Overall, while some people may not be able to borrow as much as they expect it does not mean that those on lower incomes or those with smaller deposits will be frozen out of the property market. What it does mean is that lenders will continue to take a common sense approach to mortgage lending."

A spokesman for the Financial Conduct Authority said: "We are taking a common sense approach to mortgage lending to help protect against the bad practices in the run up to the financial crisis that saw people get mortgages they simply couldn’t afford. Under our new rules, anyone that can afford a mortgage will be able to get a mortgage."

Paul Smee, director general at the Council for Mortgage Lenders added: "The introduction of MMR regulation will bring the largest change to how the mortgage market works in over a decade. The industry has shown that it is ready, and we anticipate a smooth transition into the new framework. We hope and expect the new rules will provide a robust and stable framework for the long term."

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