The introduction of the Mortgage Market Review (MMR) is part of a long term change in lending for home buyers aimed at making sure the pattern of lending that is deemed to be partly responsible for the housing crash does not happen again.
‘MMR represents a seismic shift in mortgage regulations, but also the end product of a gradual process since the recession to focus in on affordability and responsible lending,’ said Peter Williams, executive director of the Intermediary Mortgage Lenders Association (IMLA).
‘Because of this, affordability and responsible lending are already common themes in the marketplace and will ease the process of change. Going live with MMR will need lenders and brokers to continue working effectively together within an increasingly complex system so that consumers’ best interests are served,’ he explained.
‘It inevitably places new demands on all involved, but there is a shared commitment at all levels of the industry to make it work. The proof of success will be delivering the high quality customer outcomes we all desire in the months ahead. In simple terms, it means enabling access to advice and products that are best suited to borrowers’ circumstances, both in the short and long term,’ he pointed out.
‘The last 12 months have heralded the welcome return of consumer confidence to the mortgage market. MMR is another important milestone in the continuing recovery and careful handling will ensure that customers are better off for it,’ he added.
The impact of the impending changes to lending rules do mean that the mortgage lending process may take longer and borrowers will be asked for more information on their household outgoings to ensure the loan is affordable.
The Building Societies Association (BSA) is urging consumers not to lose confidence in the market or be put off by the new process.
Under the changes all applicants, bar a very few specific groups such as high net worth individuals and mortgage professionals, will receive mortgage advice. This means that although the mortgage application process will take longer than before, consumers will benefit from the expert advice on what is probably the biggest purchase of their lives.
Lenders will not only establish that a borrower can afford the loan at the current interest rate, but also if the rate were to rise over a five year period, bringing peace of mind that the mortgage will be affordable if circumstances change.
Whilst some people may not be able to borrow as much as they expect, it does not mean that those on lower incomes or those with smaller deposits will be frozen out of the property market. Due to these changes, some people may actually be able to borrow more than before, if their expenditure is lower than the average.
‘It is understandable that people are concerned about the changes to the mortgage application process, however it is vital that this new regime does not dent consumer confidence or sentiment in the housing market,’ said Paul Broadhead, BSA head of mortgage policy.
‘The Mortgage Market Review was introduced in order to ensure that a common sense approach to mortgage lending is applied by all lenders and that people are not borrowing more than they can afford to pay,’ he pointed out.
'A number of building societies implemented the process early and have been lending this way, without problems, for a number of weeks, in fact, the common sense approach has been taken for years. What will be important, particularly in the early days of the new regime, is that the FCA also takes a common sense approach to supervision, to ensure that lenders have confidence to continue lending to all creditworthy borrowers,’ he explained.
‘We do not believe that the majority of borrowers will have an issue, despite the horror stories that may appear in the coming weeks. It is highly unlikely that a single purchase or category of expenditure will make the difference between yes or no decisions, but if anyone is concerned, we would urge them to talk to their local building society for information, advice and support,’ he added.
