There was a lot of talk earlier in the year about tough new rules for mortgages. What impact are they having, if any?
You’re talking about the so-called Mortgage Market Review, which came into force at the end of April, under which lenders must carry out much more stringent checks on borrowers’ financial position. This basically means answering some pretty searching questions – not only about your income, but also about what you actually do with your money.
Needless to say, your credit history is also under the microscope like never before. And woe betide you if you ever took out a payday loan! Irrespective of the rest of your financial position, and even if you paid it off in full, it will earn you a very black mark indeed.
Under the circumstances, it’s hardly surprising that these new regulations have indeed had a significant impact. And predictably enough, even though they were designed simply to tackle the problem of irresponsible lending, that impact is being felt by everyone.
Basically, the whole process of applying for and securing a mortgage is now much more long drawn-out than it used to be. As a result, almost every estate agent I talk to is reporting that sales are taking appreciably longer. Some solicitors have even stopped taking on new conveyancing business, because they are already snowed under with so many other slow-moving sales.
However, that’s not all. Add in the fact that lenders are applying much tighter caps on income-to-loan multiples, and are wanting to see proof of how older borrowers are planning to continue making repayments after retirement - and obtaining a mortgage at all has suddenly become much more problematic for a lot of people. Furthermore, this new uncertainty means that the old ‘agreement in principle’ is no longer worth the paper it is printed on – even assuming you can find a lender who is still willing to issue one. One result is that growing numbers of solicitors are simply refusing to even begin the conveyancing process until a firm mortgage offer has been made.
Don’t get me wrong. Mortgages are still very much available for people whose finances are in good order. But the bad old days of lenders throwing money at practically anyone with a pulse are definitely a thing of the past.
And a good job too. Probably.