Only half of new UK home buyers understand new mortgage rules, research shows

Only half of aspiring home owners in the UK are aware of the new Mortgage Market Review rules that were introduced in April, according to new research.

Of those that are aware of the MMR, many still don’t understand its impact although many are now preparing in advance for their mortgage application, the research from TSB shows.

Some 41% of those made aware of the MMR feel it will ensure they can only borrow what they are able to afford and after being offered a straightforward explanation of the changes, only 3% felt they still didn’t know how the MMR may affect them.

The bank says that this shows how such explanations can go a long way to help consumers and it is good news that many aspiring home owners are now considering preparing for their mortgage application better by taking a few sensible actions.

More than half, 53%, said that they will save up as much as possible, 49% said they will check their credit report before applying for a mortgage, 45% said they will take the time to work out what they can afford ahead of their application, 29% will look to pay off existing debts and 21% will make sure they’re on the electoral roll.

TSB advices that new mortgage applicants in particular should check with their bank or building society how much you can borrow before searching for properties. TSB offers a soft search approval in principle with no impact on credit rating.

They should also have realistic expectations about what they are able to repay and work out how much you earn, spend and what you spend it on and check their report which can be done online.

Other tips include saving as much as possible as the bigger the deposit, the lower the cost of your mortgage is likely to be and if you’ve never had any borrowing, take out some form of credit such as an agreed overdraft or a credit card, but ensure you pay it back regularly to build your credit rating.

TSB also offers assistance for people whose application has been rejected, helping them understand the reasons behind the decline and assisting them wherever possible.

‘Though the Mortgage Market Review is usually recognised as a positive change by people who understand it, many still have worries as it remains shrouded in mystery,’ said Ian Ramsden, TSB mortgages director.

‘We say don’t panic, but do prepare for your mortgage application with some straightforward, simple steps. Break down your finances, work out how much you can afford and aim to future proof your mortgage as far as possible by discussing plans with your mortgage adviser,’ he added.