The Mortgage Muddle
It is just over a year since the Mortgage Market Review (MMR) enforced new rules imposed by the Financial Conduct Authority to ensure lenders were more careful about whether the borrower could afford their mortgage both now and in the future (i.e. if mortgage interest rates rise). Experian – the consumer services group specialising in credit – have just issued a report ‘The Mortgage Muddle’, which highlights how these changes continue to impact on the ability of people to borrow money (37% reporting that they feel less in control of securing a mortgage than a year ago).
The report highlights how the highest proportion of aspiring home owners has shifted from the 30 – 35 year age group, to 35 – 44 year olds over the last year – with the highest proportion looking to buy in the south east. The majority (63%) felt that lenders were being more careful on whether they could afford their mortgage. Indeed, it is not a little concerning to learn that as many as 45% of prospective home owners find themselves unable to raise mortgages (principally because they could not raise enough for a deposit – although as many as 12% of prospective buyers found they didn’t qualify for the size of mortgage they required).
It is equally apparent that the new rules are not just impacting on new borrowers; a number of people looking to downscale with hitherto ‘portable’ mortgages now find that they are unable to satisfy the new credit requirements and find themselves ‘locked in’ to their present property. It can be equally predicted that owners with interest only mortgages will find that they have no chance of renewing their mortgage on the same terms).
Whilst the Experian report (see link below) gives valuable pointers as to how to approach future borrowing undoubtedly the best course for the prospective borrower is to seek the advice of a reputable mortgage broker – as they are the best placed to source the right product for an individual’s requirements – and that they should do so as early as possible (any buyer should investigate and secure a mortgage ‘in principle’, rather than assume that the world is as it was and that obtaining a mortgage is a matter of choice rather than opportunity).
Unfortunately, the MMR is not the only thing impacting would-be buyers, as the imminent implementation of the EU Mortgage Credit Directive (ECD) will prompt even more red tape in the mortgage market for potential buyers and those looking to renew their mortgages. Despite this, just 21% of potential buyers were aware of the impact the ECD would have on their own ability to buy.
As house prices reflect affordability, such restraints must inevitably impact on house prices sooner or later.
