Recently you may have heard about changes to the way the mortgage market will now operate; known as the Mortgage Market Review.
The background to these changes goes back to the pre credit crunch period when high risk lending contributed to the near collapse of the UK banking system. The Financial Conduct Authority is keen to ensure that high risk lending practices don’t re-appear and that the mortgage market is sustainable and works better for consumers.
So what are the changes and how will they affect you as a consumer?
One of the key requirements of the new rules is that a lender must ensure that a customer can afford a mortgage by taking a far closer look at income and expenditure. The lender will be responsible in the eyes of the regulator for the affordability and income verification process.
In practice we think that those consumers who prefer to arrange their own mortgage directly with a lender will find the process a lot more time consuming. A recent press report suggested that a mortgage application interview with a lender could take 2-3 hours. Our view on this… why not let a mortgage adviser take the strain and deal with the mortgage lender on your behalf?
Another major change to the rules is that whilst interest only mortgages will still be permitted, consumers will have to prove that they have a credible strategy in place to repay the loan. Our question here is what does a credible repayment strategy look like and how do you put one together? Perhaps independent financial advice might be appropriate?
Overall we are pleased that the regulator has acted to prevent any return to the reckless lending practices of the past. However, we believe that applying for a mortgage is going to get a lot tougher for a lot of consumers so having a knowledgeable, professional mortgage adviser on your side might be an advisable course of action.
Here at Sovereign we have a team of experienced mortgage professionals who will be delighted to advise and assist you with your mortgage requirements. Call us to arrange a no obligation initial consultation.