Updated 25 July 2017
Find out more about the 2014 Mortgage Market Review from the FCA, how it works and how it affects your ability to get a mortgage and why it pays to keep your finances settled.
What is MMR?
It stands for Mortgage Market Review, which was comprehensive investigation of the mortgage market conducted by the government. The changes implemented over the weekend are directly because of its findings, which concluded that there were too many instances of high-risk lending prior to the financial crisis. This meant many people were unable to afford their mortgage repayments. So as a result the mortgage world is toughening up and you’ll need to pass some strict lending checks to qualify for a mortgage.
“You’ll need to rein in that spending. You can treat yourself once you’re in your new home. For now, keep that credit card in your pocket”
The stress test
These new checks include something called a ‘stress test’. This will assess whether you can afford to repay your mortgage not just on current interest rates, but also if there are unexpected interest-rate increases. Interest rates are at a historic low at the moment, but won’t stay that way forever. Mortgage companies are now be a lot keener to make sure you don’t bite off more than you can chew and can cope with repayments going up.
Here’s what you need to do:
If you want a lender to trust you, you have to meet them half way. Make sure all your debts are paid off, if possible. As mentioned, the mortgage company will ‘stress test’ you, to see that you can cope with fluctuating interest rates. If you have other outstanding debts that could also rise with inflation, they’ll be less likely to give you the mortgage you want with the conditions you’d like.
Get your ducks in a row. You want to make sure you don’t have any stumbling blocks between you and your shiny new mortgage. Even an unpaid bill could be enough for a lender to reject your application. A whole of market financial adviser will be able to help you with this.
A qualified mortgage adviser will be well versed about the new affordability and stress checks. They will be able to advise you what you should prepare. Find an adviser in your postcode.
You’ll need to rein in that spending. These new checks may be a lot more rigorous about non-essential expenditure. Make sure you draw up a budget and stick to it. You can treat yourself once you’re in your new home. For now, keep that credit card in your pocket.
Speaking of credit… make sure your credit record is spick and span. Lenders will be hot on the heels of your credit history to judge the strength of your finances. Make sure everything is in order and don’t apply for any other loans alongside your mortgage.
This is possibly the easiest step to take. Just contact your local council. Banks and building societies will check the electoral roll to make sure you are who you say you are and verify how long you’ve been living at your address. Get this sorted now to avoid problems later on.
Speak to a qualified mortgage adviser in your area to find out more about securing a mortgage.