New Responsible Mortgage Lending Regulations

In recent months, the UK has been celebrating the return to growth of the property market, with prices continuing to rise and lenders offering a greater range of mortgage products to suit more people.

In recent months, the UK has been celebrating the return to growth of the property market, with prices continuing to rise and lenders offering a greater range of mortgage products to suit more people. Whilst many have considered this a positive step, the naysayers have raised concern that we could be on the way to yet another property bubble.

The first week of May has seen changes come into force, however, which could increase the difficulty of getting that all-important mortgage once more.

These changes are the result of the Mortgage Market Review (MMR), a three-year study conducted by the Financial Conduct Authority into how lending practices contributed to the credit crunch.

The study found that existing regulations were not tough enough to prevent high-risk borrowing from taking place, meaning that many people were being offered mortgages which they simply could not afford. The new rules seek to address that problem, preventing individuals from taking out mortgages without seeking professional advice beforehand.

The main change to the application process is that a person’s ability to meet the monthly repayments will be scrutinised in much more depth. For example, applicants will be asked to provide a breakdown of their monthly income and expenditure, rather than just salary details, to prove the mortgage will still allow them to live within their means.

Initial reactions have indicated that mortgage brokers are wary of the changes, fearing that the increased scrutiny will put potential buyers off seeking a mortgage in the first place, and that even those who do apply might be more likely to be refused.

These concerns, however, may simply be initial reactions to what is the biggest shake-up of mortgage regulations since the market became regulated in 2004. Advice from the Financial Times suggests that, rather than being put off, mortgage applicants should be prepared, ensuring they have all their financial documents at the ready before applying – from pay slips and bank statements to information on pensions and investments.

If you are considering buying property, then why not contact us at Julie Twist Properties? We are specialists in the Manchester area, and can advise you on all aspects of your purchase, from the property itself to the financial and legal processes involved in purchase.