31 July 2014 by

It’s no longer a foregone conclusion, so get your mortgage sorted NOW!

To prevent a return to irresponsible lending, the Financial Conduct Authority has introduced new rules known as the ‘Mortgage Market Review’. The focus is centred on ‘responsible lending’ which means you can only borrow what you can realistically afford to repay.

So what impact will this have on mortgage applications and will lenders really care about how much you spend on haircuts or your monthly magazine subscriptions? Well actually, quite possibly!

The tighter restrictions and responsibility ultimately fall at the feet of the lender. They are now required to have approved policies in place to ensure a more thorough assessment is made of your income, debts and regular expenditure. They must be satisfied that you can afford to maintain your current lifestyle and still comfortably make the mortgage repayments; now and in the foreseeable future, should there be a change in your circumstances.

It is likely that different lenders will require different evidence of income. If you are self-employed you may need to provide a business plan showing your projected earnings. If you are looking for an interest-only mortgage you will need to show some forethought into how you plan to pay off the loan at the end of the term without being purely reliant on house prices rising. Basically, you should be prepared for some invasive questioning and a lengthy interrogation.

Lenders are now required to take your whole financial status into account to ‘stress test’ your ability to make your mortgage repayments over the next five years. The lender will need to consider how you would cope if there were to be a sudden rise in interest rates or if there was a drop in your household income.

In terms of how this will affect the conveyancing process, it’s far too soon to say whether the new regulations will have as big an impact in cooling the market as expected. However the general consensus is that getting your mortgage application accepted and an offer issued is going to be a much more extensive and lengthy process than it has been in the past.

The days of mortgages being a foregone conclusion are now a thing of the past, so you would be well advised to make sure you get booked in early with your mortgage adviser to avoid delay and ensure you don’t lose out on the house of your dreams!

If you require advice in relation to the purchase or sale of a property contact Nicki Iliffe on 020 7288 4719 or email nickiliffe@boltburdon.co.uk

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