Its been a few months now since the enforcement of the Mortgage Market Review from the FCA and there are still a few clients questioning why and how this will effect them, so to help out out clients, here is a bit of information relating to the MMR
What is the ‘Mortgage Market Review’ and how will it effect me and obtaining a mortgage?
Mortgage Market Review (MMR)
The MMR set out the case for reforming the mortgage market to ensure it is sustainable and better meets the needs of consumers.
It had become clear by the height of the market in 2007 that, while the mortgage market had worked well for many people, it had been a cause of severe hardship for others. The regulatory framework in place at the time had proved to be ineffective in constraining particularly high-risk lending and borrowing. The MMR package of reforms is aimed at ensuring continued access to mortgages for the great majority of customers who can afford it, while preventing a return to the poor practices that we saw in the past.
What does this mean to borrowers
The introduction of MMR has bought with it a number of issues that affect borrowers. The “multiple of income” to calculate how much can be borrowed has been removed and now the lender needs to demonstrate a detailed understanding of the borrowers outgoings and lifestyle. This has bought the introduction of much more detailed affordability calculators and budget planners for borrowers to complete before the mortgage can be agreed. Bank statements are heavily scrutinised by lenders and questions can be raised regarding lifestyle, income and expenditure. It is therefore vital to ensure that all borrowers are prepared well in advance of an application being made so that paperwork is all in order and outgoings can be explained.
All mortgages now require an in depth discussion with an adviser prior to an application, whether this is over the telephone to a call centre or with an adviser face to face. This is to ensure that the correct mortgage is chosen for the borrower and that the mortgage is affordable now and in the future. Some banks are predicting up to a 2 month waiting list for a meeting with an adviser following the introduction of MMR.
The process once a borrower makes an application is also longer due to the extra time taken for the checks that the lenders have to comply with.
How can the borrower ensure a smooth mortgage application
It is impossible to ensure that an application will not run into issues and complications on the way, however, by speaking to a professional well in advance you can at least ensure that you have the best chance of approval. Different lenders have different issues and systems. By speaking to a whole of market financial adviser you can discount non-suitable lenders and choose which provider is going to suit your situation. No longer is the interest rate the most important factor with a mortgage, in today’s world the lenders criteria and requirements often are the driving factor,
3 Top Tips from Clearwater Financial Planning
- Get all of your paperwork prepared well in advance
- Speak to an adviser who can give you advice on all types of mortgages from the whole of the market
- Lending criteria vastly differs between Mortgage Companies. Lets get it right first time