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Original poster

In the News: Mortgage Market Review - Is this really a case for panic?

140 replies

SnowBells · 25/04/2014 01:38

Starting to panic.

We are in the midst of buying a house. And now the MMR kicks in, and the media is awash with horror stories. Is anyone here in the same boat???

Problem is, we didn't do the 'scrimp for 3 months' plan. We should have, but always knew we could adjust all spending, etc. when the time comes… until we found THE house. I mean we do save hundreds a month, etc. but we didn't get rid of every single luxury there is!!!!

OP posts:
LackaDAISYcal · 25/04/2014 01:41

eh?

LackaDAISYcal · 25/04/2014 01:42

have you got your mortgage agreed in principle already? If so, you've nothing to worry about.

LackaDAISYcal · 25/04/2014 01:45

and surely the MMR is lenders assessing the ability of people to repay based on their usual incomings/outgoings. Scrimping for three months surely doesn't give a true picture of your financial health?

Really not sure what your concerns are/panic is about. Either you can affird a mortgage or you can't.

Original poster
SnowBells · 25/04/2014 01:59

We have an AIP through a broker. However, we are still to actually apply for the mortgage. Surely, that is when all the rules will be applied and not the AIP?

In the news, it is apparently recommended to scrimp and save for 3 months as every single item in your statement might be questioned. Example they used was gym memberships, takeaways, pets, etc. Pretty much everyday stuff! And sometimes, you might splurge within reason, but will the bank see it as such? So if I treated myself a little after a nice bonus, can this work against me? Apparently, they can now ask you about whether you plan for more children, etc.

We can fully afford the mortgage at 5% - and even if the rates jumped up a little - but apparently, that itself is not enough...

OP posts:
LackaDAISYcal · 25/04/2014 02:14

from what I can gather it's more about protecting borrowers from unscrupulous lenders, so if your financial affairs are healthy and you can easily afford the repayments then you have nothing to worry about.

Original poster
SnowBells · 25/04/2014 02:30

I know...

I work in a completely different sector of finance. The problem with the FCA rules these days is that they are VERY open to interpretation. Just guidelines, and then 'do what you want with it, we won't tell you how, but if you do it wrong, we'll come after you'. Easy to wash off responsibility that way. There are quite a few very pessimistic people out there who go overboard with anything the FCA says, and pretty much assume the worst… to the point that things that shouldn't really matter (and no other company spends a lot of time on) become giant obstacles.

OP posts:
Original poster
SnowBells · 25/04/2014 02:30

I gues that experience ^ has tarnished me!

OP posts:
Housepricewoes · 25/04/2014 07:23

and surely the MMR is lenders assessing the ability of people to repay based on their usual incomings/outgoings. Scrimping for three months surely doesn't give a true picture of your financial health?

You'd have thought that would be the sensible route but it's not what's going to happen.

The OP is right to be concerned. The AIP means nothing, the actual application could still fail if the lender thinks the OP's recent expenditure means they may not be able to afford the repayments.

And a key problem is that the decision is based on what the lender thinks you can afford, not what you think you can.

Housepricewoes · 25/04/2014 07:27

This link suggests that lenders are being ridiculously one side with their reviews and taking all outgoings as never ending whilst not accepting long term income that isn't contractual.

www.thisismoney.co.uk/money/mortgageshome/article-2610831/JAMES-CONEY-The-new-stringent-mortgage-rules-prove-hard-test-pass.html

Like most things, I think it will calm down in time but I fear people in the process when the new rules become effective (tomorrow) will become victims of lenders arse covering.

NoArmaniNoPunani · 25/04/2014 07:31

Is this just for new mortgages or does it affect remortgages?

Housepricewoes · 25/04/2014 07:38

It all mortgages noarmani, new lending and remortgages.

NoArmaniNoPunani · 25/04/2014 07:40

We are in the middle of remortgaging and nothing has been mentioned to us. Panicking as I bought an Alexander McQueen handbag last night

Housepricewoes · 25/04/2014 07:46

It depends how far along in the process you are.

There has been talk that it might be less stringent if you are remortgaging for the same amount with the same lender but no one really knows yet and I'm guessing that will be lender specific.

As the OP said, FCA are very good at saying their rules are not prescriptive but whoa betide you if you get it wrong so I'd expect to see a lot of arse covering early on.

Have you had your remortgage approved?

CogitoErgoSometimes · 25/04/2014 09:45

I took out a sizeable additional mortgage earlier this year with Lloyds and I was asked for quite a detailed run-down of my regular income and outgoings in person at an interview. I was told by Lloyd that they had been operating the new rules since January, anticipating the change.

FWIW I didn't find any of the questions or categories unreasonable or intrusive. They didn't expect me to 'scrimp' to afford the new mortgage... in fact, I think the whole point of the exercise was to make sure that I could afford the payments without stretching and still cover my other commitments.

NoArmaniNoPunani · 25/04/2014 18:29

Just found out mortgage was approved today so looks like I'm safe

Housepricewoes · 25/04/2014 22:34

Excellent news noarmani

MrsDesperado · 26/04/2014 09:09

Congratulations noarmani - hope the move goes smoothly!

The new MMR is causing me to panic slightly - we bought our house 2 years ago and Nationwide were happy to lend us the money. Next year we will be looking to remortgage. However, when i put our details into their calculator, the maximum they say they will lend us is only 37% of what we need - because they are now looking at child care costs. This is despite our childcare costs not changing since we bought our house So it looks like we'll be stuck unable to remortgage for many, many years to come now. I wonder how many other people will be in this position? Or who were planning to buy but now no longer can? I'm glad we bought when we did, else we would be priced out now due to these rules. Anyone else finding this? (Sorry didn't mean to high jack, thought it fit in with the title!)

Iseenyou · 26/04/2014 09:19

This reply has been deleted

Message withdrawn at poster's request.

noddyholder · 26/04/2014 09:22

It is to factor in future affordability for when rates rise It's be good thing and will calm the market which has gone silly again

NoArmaniNoPunani · 26/04/2014 09:27

Ours is a remortgage too MrsD. The thing is, because our house has gone up in value we get a better LTV ratio so the repayments have dropped considerably. Perhaps the same will apply in your case?

MrsDesperado · 26/04/2014 09:42

Yeah we will just go on to the SVR, so we will be paying more. Seems unfair that we will be unable to move onto another (better) deal despite our circumstances not changing and being good enough for them 2 years ago, and having more equity in the property now!

Agree it will calm the market, I do understand why they're doing this.

Thing is NoArmani our LTV will be much better by the time we want to remortgage too, but because they are now looking at childcare costs the multiples they are now willing to lend us have gone from 3.5x our salary to 1.5x - not enough to cover our existing amount!

Iseenyou · 26/04/2014 09:55

This reply has been deleted

Message withdrawn at poster's request.

MrsDesperado · 26/04/2014 10:14

Ok just redid it - realised I shouldn't have included the kids in DH's bit - the maximum they will lend us for a remortgage is 2.1x joint salary, which equates to approx 60% of what we need. If I take off the childcare they will lend us 4.5 x joint salary which is more than enough to cover the remortgage. It's quite a difference!

noddyholder · 26/04/2014 10:31

The childcare thing is the big issue I think. We just sold our flat and its plenty big enough for a small family and in the catchment for the best schools and the agent said we didn't want a family for this v reason and marketed it solely to young professionals with no kids

clam · 26/04/2014 10:51

Is that 4.5 x joint gross salary, or net?
I presume if they're counting childcare fees, then they'll also be looking at University expenses?