SPECIAL FEATURE: Jeremy Duncombe on MMR
26th April will see a significant change to the mortgage market.
The implementation of the Mortgage Market Review will see lenders having to meet a series of new criteria designed to encourage more responsible lending.
In short, lenders will have greater responsibility for assessing the affordability of mortgage applicants. So how is this likely to affect people that are currently applying for a mortgage or are considering doing so in the future?
Prospective borrowers needn’t worry too much, but there are a few things that people should consider to minimise any impact the new regulations could have on their own personal circumstances.
The application process may be slower
Obviously lenders have been preparing for some time, and many of the changes have already been implemented but inevitably with any big change we may see a few delays while things bed down.
Those in the process of submitting a mortgage application shouldn’t be affected too much.
However, it is worth noting that if you do change any aspect of your application that may cause it to be re-assessed it may be delayed if you resubmit after the 14th April as this is when most lenders are switching to their new processes ahead of the deadline on the 26th April.
Of course those submitting after the deadline should also allow extra time for the application to be accepted, as lenders bed in their new systems and procedures.
Clean up your credit score
With greater emphasis being placed on affordability it is crucial that any prospective borrower shows themselves to be as low risk as possible to a lender.
Your credit score is one of the primary ways that a lender decides whether or not you are credit worthy.
There can be any number of factors that may affect your credit score and making sure you stay on top of them is crucial.
Factors like making sure you are on the electoral roll, that you have a landline or mobile phone contract as opposed to pay as you go, that you show you pay your credit on time and that you don’t have any CCJ’s or any other hidden issues on your credit report will all have a huge impact.
It may be worth checking your credit report for any issues via one of the main credit reference agencies such as Experian, Equifax and CallCredit.
Be realistic about what you can afford
Purchasing a home is probably the biggest financial decision you will ever make, and although it is an extremely emotive time, you have to remember to think with your head, not your heart.
Just because a property has the garden you have always dreamed of, it doesn’t mean you should ignore the rising damp on the walls.
Be realistic about what a property is worth and also about what you can afford in mortgage repayments.
Don’t let your judgement be clouded by your emotions. Bide your time and make sure that both the property and the mortgage really are what’s best for you.
The best way to understand your options is to see an independent mortgage advisor who can talk you through everything involved in a new purchase.