The impact of the impending changes to lending rules, introduced under the FCA’s Mortgage Market Review is likely to affect around a million home-buyers this year.
When asked about the biggest risk to the housing market, interest rate rises came out on top. This time however, 29% of people say they are wary of the potential for rate hikes, up from 27% in December 2013. Despite these fears, 40% of people agree that now is a good time to buy a property.
If the Bank Rate were to rise by 1%, 14% of homeowners say that making mortgage repayments would be difficult. On the other hand, 42% say that they wouldn’t be affected, whilst a fifth say they would benefit by seeing an increase in interest from their savings.
Commenting on the results, BSA Head of Mortgage Policy Paul Broadhead said:
“There are a number of reasons why the perceived challenges to buying a property have risen since Christmas. Firstly, the new lending rules, known as the Mortgage Market Review will soon be introduced, and some lenders have already begun to implement these rules. The process of getting a mortgage is changing, but borrowers should not be put off by the new regime.
“All applicants, bar a very few specific groups, will receive mortgage advice. Whilst this means that the mortgage application process will take longer than before, consumers will benefit from the advice on what is probably the biggest purchase of their lives. Similarly applicants should expect to provide more details of their income and expenditure.
“A new feature is the requirement for a lender not only to establish that a borrower can afford the loan at the current interest rate, but also if the rate were to rise. Overall, 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. What it does mean is that lenders will continue to take a common sense approach to mortgage lending. It is important that the regulator does the same.
“Consumers are also concerned about a rise in mortgage interest rates. However if this does occur towards the end of 2015, the Bank of England has already indicated that any change will be gradual. A rise in interest rates is also a sign that the economy is recovering.
“If people are worried about the repercussions of a rise in interest rates on a current mortgage, or have questions about their ability to access mortgage finance, we would encourage them to talk to their lender for information, advice and support.”
