New mortgage Rules and your mortgage application
New mortgage rules came in to force on the 25th April that now focus on the ability of customers to afford their mortgage payments on an ongoing basis . Mortgage lenders are now responsible for ensuring that its customers can afford the mortgage that they provide. The onus is on the mortgage lenders to make sure that they have considered affordability rather than the customer.
What mortgage can I afford?
The FCA (Financial Conduct Authority) has implemented these new mortgage rules to ensure that there is not a repeat of the financial crisis where mortgage customers were able to take out mortgages which they could not necessarily afford. back then customers were just able to confirm that they could afford the mortgage.
Once these new mortgage rules are implemented, Mortgage lenders will be looking deeper in to their customers spending and affordability. They will be looking more into regular expenditure such as subscriptions , gym member ship , shopping , insurances and everyday spending activities. They may also require evidence in the form of bank statements. They will also ask more questions regarding how you expect your circumstances to change in the future, whether or not you plan on having children, changing jobs or expect more or less income in the future.
The mortgage lender will ‘Stress Test’ applicants to make sure that if interest rates were to rise that they could afford the mortgage. This will apply for first time buyers, mortgages and all mortgage types. As a result mortgage lenders may offer a lower amount or may even decline cases.
As a mortgage broker, we are putting even more emphasise on finding out what peoples weekly budgets are and also looking at documentation that the lenders will ask for such as wage slips and bank statements before applying to lenders. As ever we know what mortgage lenders are looking for including the new mortgage rules so if we have the whole picture to begin with then we can ultimately save our customers alot of time by only applying to a relevant lender and ensuring that the application is packaged correctly.