Borrowers plan cash in hand deception

Sarah Davidson

April 24, 2015

Borrowers plan to rein in their monthly spend by £159 on average by cutting back on non-essentials, while a third (29%) intend to pay off all of their debts before they make their mortgage application.

But not all potential borrowers are so savvy, as one in 10 (8%) hasn’t even heard of the Mortgage Market Review, which came into force a year ago on Sunday.

Kevin Mountford, head of banking at MoneySuperMarket said: “Since the new mortgage lending rules came into play a year ago, those looking to remortgage, existing borrowers who are moving home and looking for a new deal and first time buyers will have been subject to their lender looking more closely – almost forensically – at their monthly outgoings.

“While the rules were introduced for the right reasons, in some cases borrowers who can easily afford a mortgage are being turned down for arbitrary reasons, despite them being able to easily afford mortgage repayments.

“While we wouldn’t want to see the ease of approval going back to the pre-credit crunch levels, it is clear than some consumers have changed their spending habits in order to pass the tests, so may be trying to paint a picture that is far from the reality just to satisfy the requirements.”

Mountford added: “Those trying to ‘play’ the system should exercise caution as lenders may still require you to prove where your cash goes.

“Using a credit card to hide your spending may also count against you as lenders have access to your credit report, so will be able to see a real-time snapshot of your credit card balance at any time within the month.

“Research and shopping around for the best deal is an essential first step when applying for any mortgage and don’t forget, you need to look beyond the rate of interest to the fee as well, as this can significantly impact the total cost of the mortgage over the term of the deal.”

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