How has the mortgage market changed in
the last 3 months?
In April 2014
the FCA implemented a new set of rules within the mortgage market place known
as the Mortgage Market Review (MMR). One
of the principle aims of this is for banks to have much stricter control only
lending money to those that can afford it.
The issue? Every banks interpretation of this is different and no two
mortgage clients are identical.
The industry
has seen a significant fall in mortgage approvals since April. Is this due to less
people being eligible for a mortgage or is it down to the length of time to
process a mortgage to approval stage?
From a
brokerage perspective it is not due to less people being eligible. We have noticed
that it has taken much longer to progress mortgage applications
through to an offer stage in comparison to pre MMR times. One key contributor
to this is the new documentation requirements.
Those who
are self-employed looking to purchase or remortgage a property, would be advised
to request your HMRC confirmation of earnings (SA302’s) as soon as possible.
They can take up to two weeks to obtain. ‘Self employed’ also includes any
shareholder of a limited company with more than a 20% share in the
business. If you don’t have these this will
delay the process for yourself and any vendor of a property you are buying.
Due to the
housing market moving upwardly the number of applications has naturally
increased. As the volume of applications has risen, valuations are taking
longer to complete.
What do you need to know?
It is important
for those looking to purchase a house that you take into account the time it
will take to receive an offer. We are seeing a lot of pressure, especially by
estate agents, to get valuations done and the mortgage approved by the lender
in order to fully secure a property with the vendor.
The most
complicated aspect of the introduction of MMR is affordability. Most lenders
had moved away from an income multiples systems already, however MMR has meant
the introduction of yet more complex models assessing affordability.
In addition
to this, no two lenders are using the same method of calculating affordability,
so we are seeing a real variance in the amount people are able to borrow from
lender to lender.
We recommend
consulting someone who has experience and knowledge of the different
requirements for each bank. It is too
complex for individuals to calculate what they can afford, especially through
comparison websites as they are not complex enough themselves to calculate if
you can genuinely borrow money off their best buy listings.
By
contacting a mortgage consultant to discuss your current circumstances, you
will get an idea of what you could borrow and understand the budget for a new
home.
