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 BSA, however, is urging consumers not to lose confidence in the market or be put off by the new process.
All applicants, bar a very few specific groups (high net worth individuals and mortgage professionals), will receive mortgage advice following the new rules. 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.
Commenting on the new regime, Paul Broadhead, BSA Head of Mortgage Policy said:
“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.
“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. 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.
“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.”
