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

[SnowBells]

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!!!!

I think this will mean a lot of people will be trapped on the SVR. Our circumstances have changed this last year, for the better personal wise but have had a drop in income and whilst we are still comfortable I know when looking for a new fix next year we may run into problems.

There are more lenders than Nationwide. If you can genuinely afford a certain level of payments - and there will be others like you - a canny lender will realise there's a market opportunity and they will exercise some discretion.

Jeggings you should be able to switch to a new fixed rate with your current lender without having to go through any of the affordability checks again. You just may not be able to switch to another lender.

I agree with the new rules in principle and longer term I think they're a good idea. In the short term I think the new rules may be applied a little over-zealously and make things difficult for people who have manage perfectly well in the past, will again in the future, but will struggle in the next 12 months - me included.

However, I have little sympathy with the idea that this is about the good of the would-be home owner. Lots of people who will find themselves unable to get a mortgage/re-mortgage under these rules will be paying more in rent or falling onto SVR terms than they would be if they'd been considered eligible for a mortgage.

My sister went through affordability with her current lender

Eventually they will probably look at individual cases surely as a blanket system just can't work long term.

Eminybob that's good to know, thank you. I have read something similar but then I have also read that it will impact on a new fix, I'm sure it will all come to light as things settle and it become the norm. I do agree with these 'extra' checks if I am honest, a mortgage can be a greater commitment than marriage ;)

Ops meant to add, that whilst I agree in principle, I do believe that the SVR trap will need to be accounted for otherwise it could lead to the opposite desired effect with many not being able to afford the payments.

Though it's a vicious circle as if these extra checks had been in place originally then those that would struggle with a interest rise would not of been given a mortgage.

But everyone should be able to afford thenSVR otherwise that is admitting that only a special lower rate is manageable I think the svr should be the benchmark surely

I think the short term losers will be those people who currently have to pay very high rents which account for a big proportion of their salaries.

They know they can afford to live on what's left if they took on a mortgage with similar, or more likely lower, payments, but the lenders aren't going to agree.

I agree with the principle of responsible lending but 'one size fits all' isn't going to work.

It will certainly be sensible to shop around. My child and their spouse used a mortgage broker (completed just before the rules changed) and got a decent multiple and they kept the husband's one bed flat (he took out a buy to let loan on that at the same time) but they have no children so no childcare costs.

It is all a bit fake in a sense as the system now looks at your position now but cannot know how it might change. My child is fairly newly married so anyone with any sense will see it's likely they might have childcare costs in a year or two.

I do recommend using a mortgage broker even if you pay for that as they often know the market very well and criteria of all the different lenders.

I agree in principle noddyholder but back in the day interest rates went up to 15% whilst I don't think we will get anywhere near that (hopefully!) the SVR being the benchmark of affordability is a bit hard to pinpoint as it's expected that it's not set in stone.

So what will the cut off be? What potential rise will be deemed to much? I think I read that people will be checked as being able to afford up to 7%, I need to do more reading possibly as I'm not as clued up as I should be!

I meant to say in my post that if someone with a mortgage can't fix and has to stay on the SVR then at the mercy of a fluid situation the opposite desired effect of these changes may start to kick in.

We are in a very lucky position financially even with deciding for quality of life purposes taking a drop in income since we took out our mortgage, on paper we have less outgoings then we ever did due to now having no outgoings other than expected utilities and mortgage due to a substantial lump sum received but we now have a lower income, I'm not quite sure where we will fit in to these new rules when looking to do a new fix.

Thanks Cognito. I know, you are probably right, and other lenders will have different criteria, but none of it bodes well for me.
It just feels like the motivation to earn more, do better is being taken away,as the main reason I want to do that is to be in a position of never having to move ever again if I don't want to!

The student loan thing is such a con. In principal it is not included as a debt like cc and personal loans when calculating mortgages but the monthly debit is counted in affordability calcs. I have a ds at uni now so most of my RL friends are the same or with older kids and they have no hope of ever buying a home in the SE so I hope prices do fall and rates rise to encourage saving.

I think that what I'm trying to say Iseenyou, someone not being deemed suitable for a certain fixed rate but are deemed capable for a higher SVR. Could that not start causing problems? Absolutely people should be prepared for any rise in costs with a mortgage but the reality is that some will struggle which could lead to more repossessions?

Hopefully like the PP advised, most should still be able to 're' fix with their current lenders.

Yes the student loan thing, only a couple of years ago when they put it up to 9k the government said it wouldn't affect mortgages, so how is 40-50k of student loan debt going to be factored into affordability. It's a bit late now for those who have already taken on this debt. Luckily DS was in the last of the 3k lot but still has a sizeable debt

The current calculations don't take the total loan off what they lend BUT they do include the monthly payments as a bill on affordability. And it's doubtful anyone earning under 21k would be getting a mortgage so I think it will affect everyone eventually. I can't see the current system for student loans remaining as it would be an easy target to make them pay from job one day one. (Graduate tax) which is a worry as my ds is one of the 9k lot

The thing is the SVR thing won't be considered in that wayIMO. When you sign up for any deal it is always on condition you revert to it when deal ends unless you secure another. So if you sign saying you can afford it and then default you will be in trouble

Re: student loan declarations on loan agreements, this is taken from the MoneySavingExpert forum:

"Most normal financial transactions and credit relationships you have are listed on these files - yet student loans are not included (with the exception of students who started university before 1998 under the original loans system and defaulted)."

"So the only way loan, credit card or mortgage providers know if you've got a student loan is if they choose to ask on application forms. They can do this and it happens, but in general it's only for bigger value transactions such as mortgages."

Of course student loans should be taken into account! Just say you and I both earn £30k, and all our other outgoings are the same except you pay £100 per month as a student loan payment, of course you should be able to borrow less than me, as I have £100 per month more disposable income than you.

A pp said earlier that a "one size fits all" approach shouldn't be used. Well that's exactly what was happening before, when income multiples were used. This approach is based on each households individual circumstances, the complete opposite of one size fits all.

The SVR issue I think is being blown out of proportion too. I work for one of the largest high street lenders and we have never, nor plan to, assess affordability to switch you to a new fixed rate after your current one ends. The affordability rules only apply to new lending only (either new to you or new to the lender)
Don't forget, the rules are made by the FCA who's interest is protecting the borrower, not the lender, who you may feel want to "trap" you in a higher rate.

I am not worried about a grad tax I agree with it but I do worry he will never own a home.