MMR is here. What does it mean for mortgage-seekers?
You may have thought last Saturday was just another normal Saturday, but that was actually MMR Saturday. No, this has nothing to do with injections, this was the date upon which the Mortgage Market Review rules came into force- which could mean it becomes harder to get a mortgage.
Of course, for many people, getting a mortgage in the first place was hard enough, but the new FCA rules, which have been five years in the making, are designed to ensure that people simply can’t get themselves in as deep financial schtuck as happened in 2007. In brief, the rules have been tightened to ensure affordability, evidence of income and future proofing.
The aim behind the rules is genuinely to protect consumers- from themselves in some cases- and to ensure the mortgage market as a whole is more transparent. Lenders will also have to disclose any fees they charge for advice, even if these were previously included in product fees etc.
From now on, lenders will need more information about your personal circumstances, and not just your provable sustainable income- self-certification mortgages (where you could essentially make up your income) are no more- they will also need to know about your day to day finances. An affordability check is now compulsory, and the lender will look at your bills and the effect of a change in interest rates to make sure you can service your mortgage.
In addition, while lenders are still allowed to grant interest-only loans, this market has been tightened, and will only be permitted where there is a "credible strategy" for repaying the capital. There are also transitional provisions in the MMR that allow lenders to provide a new mortgage or deal to customers with existing loans who may not meet the new MMR requirements for the loan. These provisions came out of discussions on the original plans which would have left some borrowers stranded, and unable to move or change their mortgage. In these circumstances, the borrowing is not able to exceed the amount of their current loan, unless funding is required for essential repairs.
Of course, some lenders already carried out similar checks, and some have been adopting the provisions of the MMR early; however, it is expected that there will be a knock-on effect making it harder to get a mortgage, at least temporarily while lenders get used to the new regulations.
The FCA has also produced a handy guide to what the MMR means for you, which can be viewed here.