Changes to Mortgage Application Restrictions Set to Dampen Property Market
Tough new rules are set to be introduced to mortgage lenders, which will make it even harder for first-time buyers to obtain a mortgage. The rules are designed to prevent lenders from giving mortgages to customers who can’t afford them and will require them to take into consideration all of their customers spending commitments, including gym memberships, phone contracts and even how much you spend on food, grooming, childcare or nights out. Mortgage lenders can ask to see up to 6 months of bank statements to get an overview of your monthly outgoings in order to assess whether you can actually afford your mortgage repayments.
If it wasn’t hard enough for first-time buyers to stump up enough to put a substantial deposit down on a property, these extra restrictions are likely to prevent even more first time buyers from obtaining a mortgage. The new rules will apply to all new mortgage applications, so even if you have had a mortgage for 20 years and just want to re-mortgage to get a better deal, you will still be subjected to the invasive affordability questioning and may find you are unable to obtain a mortgage under the new guidelines.
Buyers are advised to get their finances in order at least 6 months before they will want to apply for a mortgage. It is a good idea to try and reduce your outgoings wherever possible and to eliminate any frivolous expenditures that could make you look like a potentially risky mortgagee. This will all help you in the long-run, not only making your finances look sensible to lenders, but will also help you afford the mortgage if and when it is finally approved. The application process will take a lot longer under the new rules, so you should prepare for a wait and it will undoubtedly burden lenders with extra costs, which they will inevitably pass on to borrowers.
These new rules will not do anything to help those wanting to sell their properties, who will see a significant reduction in the number of people looking to buy. Sellers will undoubtedly look to cash buyers and quick sale companies like National Homebuyers, who can provide a quick and reliable service and purchase their property quickly without a convoluted chain of buyers all waiting for mortgages, which may or may not be approved.
The increasingly complicated nature of the application process is causing more and more borrowers to seek more detailed advice before applying for a mortgage. Increased demand for such services has resulted in waiting times of up to four weeks in some areas. These consultations generally take around three hours and can take longer if prospective mortgagees do not have all the relevant documentation with them. And all of this before even beginning the mortgage application process itself!
Unsurprisingly, the new rules for mortgage lenders are predicted to considerably slow the market down, by slowing down the mortgage application process and by reducing the number of mortgage approvals. There is growing concern that the housing market will become unstable again and house prices could take a downturn as a result of these changes to mortgage lending.