Lifestyle quiz to secure a mortgage comes into force today
From today, new rules come into force that mean borrowers across the EU will be refused a mortgage if they fail a standard affordability assessment.
According the the Financial Conduct Authority (FCA) the Mortgage Market Review (MMR) will ‘put common sense at the heart of the mortgage market and prevent borrowers ending up with a mortgage they cannot afford’.
So basically, if you want to take a mortgage out you now have to undergo extreme scrutiny to meet certain criteria regarding your affordability; e.g. prove what you spend on shopping, prove how much you spend on child care, prove how much you spend on standing orders, prove how much you spend on fuel, prove how much you spend on a haircut, etc…
Lenders will also have to “stress test” an applicant’s ability to repay if interest rates increased over a five-year period. This is expected to lead to some applications being rejected.
However we are all aware that, like an MOT, affordability is only relevant to that period in time and can change within 24 hours.
LRS wonders if this is like other Government “schemes” that try to make it look like they’re doing something positive but in the cold light of day are totally ineffective to the real issues going on.
Is the real point behind the MMR to allow the Government, like “Big Brother”, to scrutinize everything that we do, everything we earn and everything that we spend our money on? This is the type of data that they will have access to – so will this all become relevant in any future tax investigations, etc …? And unless we can all prove beyond reasonable doubt that we have not spent more than we should have, within a certain period, some jumped up underwriter in an office somewhere will be telling us we cant afford our new home …?
In an ongoing LRS Discussion here are two interesting quotes on the MMR from LRS members:
I was watching BBC breakfast this morning about the MMR coming in today. I was amazed at the lady whose mortgage company offered her less because they assessed that she was spending money on her lifestyle in the past and therefore would not be able the afford the mortgage in the future. FFS this government is starting to treat us all like moronic children when they challenge our sensibility by questioning us on our affordability to live somewhere by how many haircuts we have in a given month.
I would love to fill out one of those forms and declare that I have irritable bowel syndrome and therefore may have a fluctuation in my expenditure due to the fact that I need to buy new pants now and then because on occasion I have sharted myself, I wonder if they have a box for that one “Sharters = £10k less on the offer”. See more at: http://www.landlordreferencing.co.uk/forum/discuss/community-forum/government-says-benefit-claimants-more-responsible-than-workers/
Most of us only really begin to spend when we own our first homes because the cost of furniture and furnishing seems never ending and this is if we haven’t taken on a property that needs major works, new kitchen, windows etc. People who have saved hard and kept their spending down – as most people have to when saving a deposit – suddenly find themselves spending every penny their earn and then the babies comes along and …………..
This is another good theory but bad reality and lord help the students who are coming out this year with average debts of £53K – Generation Rent is set to take off and landlords will no doubt continue to be blamed for the affordability of buying and the cost of renting – I can’t remember who was blamed for all the ills of the UK before the Housing Act 1988 and Buy to Let Mortgages increased the number of landlords in this country? See more at: http://www.landlordreferencing.co.uk/forum/discuss/community-forum/government-says-benefit-claimants-more-responsible-than-workers/
- Have you taken precautions against the MMR? If so, what are they?
- Will the MMR affect agreements in principle?
- Will it put a dampener on the market?
- Will more chains end up collapsing?
Whatever your views are on the subject please share them with us and the rest of the LRS Community, by CLICKING HERE.