New Mortgage Rules Could Mean Cutbacks for Buyers
New affordability rules for mortgages, introduced on April 26th, could mean big changes for many home buyers. Areas of spending that were previously overlooked by lenders could now have a bigger influence on their decision. This could cause problems for some buyers who are offered less than they were expecting. What can you do to have the best possible chance of success?
The New Rules
The Mortgage Market Review will bring changes to how lenders assess whether or not a buyer can afford a mortgage. It could make it harder to qualify or reduce the amount of money a bank or building society offers to lend.
Lenders will scrutinise the bank statements of potential customers to see if they can realistically afford the monthly repayments. This will take into account areas of spending that were previously overlooked, including the costs of childcare. However, it will also assess the spending habits of applicants, covering everything from the amount spent on takeaways to mobile app purchases.
Preparing for a Mortgage Application
If you're thinking about applying for a new mortgage, whether it's to buy your first home or a dream property with wrought iron balcony railings, industry experts suggest that you start preparing a minimum of three months before. This gives you a chance to reduce your spending where possible and pay off any outstanding debts. Rather than waiting until you have a mortgage, you should act as if you do and reduce your monthly expenditure accordingly.
Research from Money Dashboard shows that by making a few simple changes to your lifestyle, you could easily improve your financial standing. They analysed the spending habits of 20,000 people and found that on average they spent Â£12 a month on music, Â£37 on takeaways and Â£99 on concert and theatre tickets.
Taking Advantage of the Changes
There will always be those who are negatively affected by any changes. These ones are likely to hit families the hardest, especially if they have large childcare commitments. They may be offered a lower mortgage than they anticipated. However, there are also those who will benefit. The changes will be good news for those with a good credit history and few monthly bills and who are regular savers.
Whenever you apply for a mortgage, it's important to ensure that you can meet the repayments, even if rates were to increase. These changes will mean that lenders will look into this much more closely than before.