- varying
qualifying requirements by lenders;
- conduct of
business; and
- advice and disclosure charging.
The detailed
analysis looked at the effectiveness of the existing regulatory framework and
outlined some proposed changes.
Don’t bite off more
than you can chew!
In essence the changes want to ensure
that customers don’t bite off more than they can chew and be unable to meet
their monthly mortgage payment if interest rates rise.
Having
debated the proposals put forward for some years the following summarises the
changes that were implemented in April this year.
- Introducing the Affordability Assessment. The
lender/broker must check borrower meets lenders eligibility criteria.
- Mandatory income verification on all loans. No
more self-certification lending.
- The stress test. Mandatory interest rate stress
test. The lender has to take
account of future interest rate rises on the mortgage payment.
- All staff selling mortgages must have a relevant
professional qualification.
- Key facts illustration will be used less and the Initial Disclosure Document (IDD) will be replaced by a requirement for firms to disclose key messages to the customer.
Test your stress
This new
test is not designed to test your own stress levels but encapsulates the new MMR
rules by clearly defining a ‘stress test’ for homebuyers to make sure they
could afford a possible higher monthly mortgage payment as and if mortgage
rates rise.
Also to
overall make lenders lend more responsibly and in line with this the buyer to
be sensible about what they can really afford.
Number 7 lucky for some
Many banks
and building societies have already embraced these changes and already test
potential applicants on the basis of mortgage rates hitting 7% in the next five
years to make sure they can meet that payment. To elaborate some lenders are
offering very low fixed rates so if rates were to rise to 7% this would be a
large increase to monthly outgoings.
The
regulator want to make sure that loans are not granted if a bigger mortgage
bill could break borrowers’ finances.
The Nitty Gritty
The new
rules are a dramatic change to by-gone days of the 4 times your salary and a
few checks got you a mortgage offer.
Potential borrowers will face a much more stringent check on their day
to day finances and spending down too food bills, utility bills, debts,
holidays, and social, all a far cry from years ago.
Wherever you hang your
hat
Where you
hang your hat is your home as they say and ensuring you always have a hook to
hang your hat on is important to most of us.
David
Jordan Estate Agents
aspire always to deliver to you a cutting edge service and work with you to
find your dream property.
The time is
now David Jones Estate Agents is here to
make it a clean run whether buying, selling or letting.
Call us on: T: 01323 898414
or email us using the details on our website www.davidjordan.co.uk
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