Following the government’s five-year overhaul of the mortgage market, known as the Mortgage Market Review (or MMR), much tighter mortgage application regulations are now in force in response to high levels of irresponsible lending in the past.

Since 2014 it has now become more difficult for many people to secure the mortgage they need and there are five key areas where mortgage applicants, including people remortgaging an existing property, will feel the effect of these regulations most acutely:

1. Mortgage advisors need to ask more questions to determine what mortgage product is suitable, taking into account the applicant’s personal circumstances in detail. Mortgage interviews could take longer than expected and may even be split into two separate interviews.

2. Lenders must assess the future affordability of mortgages, as well as initial payments, by applying an interest rate “stress test” – to ensure that the loan would still pass affordability requirements when interest rates eventually rise.

3. Lenders also have to consider the impact of possible/known future lifestyle changes such retirement or redundancy, when assessing affordability.

4.There is now greater scrutiny of borrower’s expenditure. For example, the impact of school fees or holidays as well as day-to-day groceries will be taken into account and borrowers may need to produce more evidence of their spending habits.

5. Interest-only mortgages are now harder, but not impossible, to obtain, as borrowers must be able to demonstrate a credible repayment strategy to repay the loan at the end of the term.

At James & Co, we have always ensured that any offer we submit to our clients is from a buyer who is well-qualified and it is now more important than ever to know in advance that the buyer’s mortgage application will indeed be approved before a purchase is even agreed – so you can sleep easy!

– Jude