The Mortgage Market Review – What’s it all about?
In an aim to ensure borrowers are not offered loans they cannot afford, new mortgage rules came into force in April 2014. The new rules are known as the Mortgage Market Review (MMR).
Many borrowers and lenders panicked with the introduction of the mortgage market review rules, but in truth the impact of MMR on mortgage approvals has not been as negative as many first feared. Sure, most lenders changing their lending criteria has formed a slightly new borrowing landscape making it more difficult for some borrowers to find the finance they need, but the finance is still there and lenders still want to lend!
Thankfully we work with specialist advisors and industry experts who are just as well placed to tackle any new obstacles MMR has brought about as they were pre-MMR, and the most prudent brokers were prepared and had already implemented the changes to their procedures before MMR came into force.
So how will MMR impact me?
Now, when you arrange an appointment with your mortgage advisor you’ll be asked detailed questions regarding your lifestyle and spending habits. Historically this was not necessarily a mandatory requirement, but MMR now requires lenders to accurately assess what you can afford to spend on a monthly basis before deciding how much you can borrow.
Lenders will be looking at how much money you spend on all sorts of things, including:
- Gym membership
- Eye care
- Dry cleaning
- Dental care
- Mobile phones
- TV and Internet
- Cleaning products
You also may be asked:
- If you ever gamble
- If you have children
- If you are planning on starting a family
- Do you have plans to start your own business, become self-employed, and is your income likely to change in the coming months/years?
- Are your outgoings likely to change significantly in the coming years?
These regular outgoings can be cross referenced to your bank statements and can impact the amount a lender is willing to lend to you, depending on your monthly disposable income after these deductions.
The positive impact of MMR
Despite what some borrowers and advisors may think, MMR is actually a great thing on the whole. More accurately assessing a customers’ ability to repay the loans they borrow will not only benefit the borrower from overstretching themselves, but is likely to reduce the incidence of default and extreme measures such as repossession, and improve the industry and economy as a whole.
Often customers can be unaware of the implications or indeed have an accurate idea of what they can afford, and it is right that lenders and advisors take responsibility for that assessment. More people living within their means can only be a good thing!
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The negative impact of MMR
As lenders now carry the weight of more responsible lending, most banks and building societies have completely revised their sales processes. Due to the lengthy questions lenders are having to ask their customers, appointments are taking far longer and often customers are required to revisit multiple times, whereas pre-MMR things were often completed in one sitting. The knock-on effect of this is an increased staffing demand and not enough hours in the day to complete the process, hence why waiting lists for 1st appointments can span over two months in some areas of the country!
Unlike many banks struggling to keep up, mortgage brokers and the specialists we work with at Online Mortgage Advisor have the time to sit down and help without you having to wait an age to get started!
How to cope with MMR changes if you are declined
If you’re reading this article, there’s a good chance you’re thinking about applying for a mortgage. Don’t be put off by MMR. If you’re not able to find finance your advisor will guide you through the mortgage process so you are eventually in the right position. There are certain steps you can take to increase your chances of securing a mortgage:
1. Pay off real debt
If you are able to clear debt, then this is definitely something you should try and tackle before applying for a mortgage. Lenders are hot on any loans, credits cards or debts you may have and freeing up some monthly income can work wonders to your maximum loan size.
2. Cut down on your spending habits
As you’ve seen from the info above, lenders will scrutinise your bank statements, usually going back over the last 3 months, sometimes six depending on the situation and the lender. So if you can cut down on luxuries on the run up to making an application then it’s definitely going to help.
3. Improve your credit rating
There are many steps you can take to improve your credit rating.
- Put your name on the electoral register
- Cancel unused credit cards
- Open a credit card to build your credit history
- Don’t miss any payments
- If you partner or housemate has bad credit, keep your finances separate
- Don’t apply for lots of credit in a short space of time
- Avoid using or exceeding your overdraft
- Avoid payday loans!
But remember, if you have missed payments, have bad credit or are not able to follow the above guidelines, this doesn’t mean to say that you won’t be approved for a mortgage. The specialists we work with can help!
4. Call Online Mortgage Advisor and speak to a specialist.
The brokers we work with are market-leading specialists with a very thorough market knowledge. They are able to find finance where other brokers can’t, especially those who have struggled since the roll out of MMR.
The main thing to remember is; if you have been declined by a lender, don’t be put off. Despite the MMR changes there is still a rising demand and approval success for mortgage borrowers, particularly amongst first time buyers, where according to the Council of Mortgage Lenders, lending figures saw a 19% increase from May 2013 to June 2014. So although lending may be more difficult for some borrowers, it is clearly still possible – you just need to know where to look!
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