25th April 2014
People applying for a mortgage are to face tougher financial checks, as the Financial Conduct Authority's new market regulations take effect tomorrow (26 April 2014).
The mortgage market review (MMR) started five years ago after the downturn in the housing market and was designed to prevent lending excesses and provide better protection for consumers.
Under the new rules mortgage applicants will have to:
- provide evidence of income
- give information about basic living costs
- provide details about existing debts
- for interest-only mortgages, applicants will have to show their plans for repayment.
Lenders will also examine the impact of future interest rate changes on the person's ability to repay the mortgage.
Clare Francis, mortgage expert at MoneySuperMarket, said:
"The MMR has been in the pipeline for the past few years and mortgage lenders have already implemented a number of changes in anticipation of the new rules so this is unlikely to lead to drastic changes that will knock mortgage-seekers sideways, but some people will notice changes.
"Those looking to remortgage, or existing borrowers who are moving home and looking for a new deal, may find the application process takes longer with lenders and advisors doing more in depth questioning and some may feel that it is tougher to get a mortgage now than it has been in the past. Lenders must be sure that the applicant can afford the loan, not only now, but also in the future."