Warning: Late repayment can cause you serious money problems. For help, go to moneyadviceservice.org.uk
Warning: Late repayment can cause you serious money problems. For help, go to moneyadviceservice.org.uk

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Tough New Mortgage Regulations

Tougher Affordability Checks

The new mortgage regulations went into effect in April and people are finding it much more difficult to get a mortgage. 
 
Taking out a mortgage was already a fairly difficult and painful process for a lot of people but with the shake-up of rules surrounding affordability it is now set to become even tougher. Admid fears of the housing prices starting to finally dip and banks and building societies being increasingly nervous about lending it could spell trouble for potential homeowners. Experts are predicting that around up to 20% of people who could have got a mortage before may well be unable to do so. 
 
The Mortgage Market Review is now in force. This is essentially a new set of rules created by the Financial Conduct Authority which have been designed to protect consumers from taking out more credit than they can realistically afford to pay back. Lenders and brokers however dispute these new regulations saying that they are just reducing consumer choice and giving some people no options at all.

The Stress Test

Under the new regulations up to half of mortgage applicants will need to see a qualified mortgage advisor. This will lead to a longer, more drawn out buying process which could see more house sales falling through or lead to mounting fees. 
 
A further change the FCA has brought in with its new guidelines is a 'Stress Test' of applicants. This will check to see how well they would cope with a potential rise in the interest rate of their mortgage. This will go along with the existing (and additional) expenditure checks to work out if you can afford the mortage now and potential still afford it should circumstances change for the worse. This of course will prevent some applicants who have minimal disposable income being able to get a mortgage at all. If the applicant does not meet the requirements of the mortage at the original rate PLUS an additional projected increase they could well be rejected.

Have Your Say

What do YOU think about these changes? Have your say on our Mortgage Discussion Page.

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