Mortgage application changes 14-04-14

[Sarnie]

anonymous said:

[redacted]

To be honest, if a lender declines your application because of a gym membership then you probably can't afford it anyway.

To be clear, lenders are NOT deducting things like gym membership from income to arrive at a lending figure in the same way they would with a loan payment. All they are doing now is being more thorough in their questioning to ensure their decisioning is more accurate and appropriate.

All lenders will use national statistics to arrive at average figures for most areas of spending. For example, the reason why they decrease lending for applicants with children is because they make automated assumptions for increased food bills, clothes and childcare etc etc. All they are doing now is rather than assuming anything, they are asking the questions directly. They will assume that two children cost x amount in childcare but if your answer is way more than what they would normally expect then they are likely to adjust your borrowing accordingly.

[Rick101]

To be honest I'm a bit surprised they weren't doing this anyway. I've always had to send in bank statements previously. I'd assumed someone was looking through thr debits and questioning any undeclared regular payments.

Got a remortgage coming up so we'll see how things change. We're pretty careful with money though I have recently taken a car lease which is a big chunk I've never had to pay before.

[Fastpedeller]

A good move on the whole - although most will probably think it isn't.
When I first had a mortgage, they used a 3x salary as the guide amount they would lend. I didn't have any other loans (boring fart with old car and used bike for work to save money), and they asked if I wanted more! But I said I was happy I could afford that and didn't want to borrow more. Then came the 1990's slump and negative equity!
Unfortunately the lenders have had a conflict of interests and this has led to irresponsible lending and got us into the mess we're in.
Some responsible lending (and borrowing) will lead to a drop in prices which will eventually stabilise the market. It's about time folks realised a house is where you live, and shouldn't be viewed as an investment opportunity - The only people who make money out of property are the lenders and (because of all the hype) some buy-to-let people. The Buy-to-lets wouldn't have happened if all the 'property prices will keep going sky high' hype hadn't been fuelled by the lenders. Rant Over......

[skeeterm5]

Fastpedeller said:

Unfortunately the lenders have had a conflict of interests and this has led to irresponsible lending and got us into the mess we're in.

I think you mean irresponsible borrowing..... People need to take personal accountability for their own decisions, this is why we got into the mess because people want to blame somebody else.

S

[eldar]

skeeterm5 said:

I think you mean irresponsible borrowing..... People need to take personal accountability for their own decisions, this is why we got into the mess because people want to blame somebody else.

S

True. Irresponsible lenders lending to irresponsible borrowers under irresponsible regulators was never going to end well.

[kmpowell]

Our story so far...

- We are FTB and had a mortgage in principle a few weeks ago.
- We put an offer in on a house last Wednesday and it was accepted.
- We asked for the mortgage wheels to be put in motion, but were told we'd need to re-apply due to the MMR.
- This time around we were asked to declare our forthcoming child care costs (£900pcm), and my partners maternity leave which finishes next month (she goes back to exactly the same job, pay etc)

Under the new rules the total amount being offered to us had dropped from £530k down to £400k! Luckily we only need £300k, so it doesn't affect us.

We're still waiting to hear back if we've been successful, however our broker doesn't think it'll be a problem given we're not after the full amount and we both earn good salaries.

I do have some serious worries though. What on earth is this change in the rules going to do to the market?!? Less people being accepted means less people in competition, meaning less demand. Also as previously pointed out in this thread, what's going to happen to the people who were accepted when stretched, now going for remortgage? They'll either have to swallow the increased standard rate, or be repossessed...

We're buying at the top of the market in London, and I can't help but feel worried, but is it just FTB jitters?!?

Edited by kmpowell on Monday 28th April 22:17

[Sarnie]

kmpowell said:

Our story so far...

- We had an offer in principle a few weeks ago.
- We put an offer in on a house last Wednesday and it was accepted.
- We asked for the mortgage wheels to be put in motion, but were told we'd need to re-apply due to the MMR.
- This time around we were asked to declare our forthcoming child care costs (£900pcm), and my partners maternity leave which finishes next month (she goes back to exactly the same job, pay etc)

Under the new rules the total amount being offered to us had dropped from £530k down to £400k! Luckily we only need £300k, however that's still quite a drop.

We're still waiting to hear back if we've been successful, however our broker doesn't think it'll be a problem given we're not after the full amount and we both earn good salaries.

I do have some serious worries though. What on earth is this change in the rules going to do to the market?!? Less people being accepted means less people in competition, meaning less demand. Also as previously pointed out in this thread, what's going to happen to the people who were accepted when stretched, now going for remortgage? They'll either have to swallow the increased standard rate, or be repossessed...

We're buying at the top of the market inLondon, and I can't help feel worried, but is it just FTB jitters?!?

Edited by kmpowell on Monday 28th April 21:48

But surely this is a prime example of why MMR has been implemented?

If they'd not asked the question, they would never of known that you were going to have forthcoming childcare costs of £900 per month. That's more than most people's mortgage payment.

If you fell in to arrears with your mortgage and you went through your expenditure with the lender and disclosed what you were paying out, they'd previously rightly say that they didn't know that you were going to be having such high child care costs, to which you'd rightly say that they never asked you about future costs.

This is why MMR has been brought in. You are fortunate that your income is sufficient to swallow the reduced affordability and is why it's right that you are still able to secure the lending that you require.

There's going to be a long bedding in period in my opinion as people have to adjust to the new regime and what their lending capacity now is....

[anonymous-user]

I can't see how house prices can still continue to climb with people being able to borrow less.

Last year (although I didn't quite have enough savings at the time), I could have potentially got a £120k mortgage against a £185k property with 60k savings.

Now the prices have rocketed to 210k-215k, and what I can borrow may possibly have gone down, so instead of being about 10k short last year, for the same property now I could be around 35k+ short!! That is really depressing.

Although people keep talking up price rises, I cannot see how people on a single average wage can afford anywhere, especially if lending it being tightened up. I got some paperwork through today for a new development in Laindon, Essex today. Prices start at £219K, that is for a small 2 bed house (possibly terraced as they are not built yet) with no garage. How can the normal person getting on the ladder now afford this without many multiples of salary?

Hopefully the mad HTB2 rush is dying down and some sensibility will return to the market.

[Type R Tom]

The more I read the more depressed I get, there was an article in The Times on Saturday saying lenders are putting interest rates up to stop people applying for mortgages during this transition period and creating a back log, brilliant!

I really don't know what to do, with a reduced borrowing power and increasing prices I either go for a place significantly worse than I could have 6 months ago or wait for prices to drop, with people borrowing less prices must come down.

[Sarnie]

Type R Tom said:

The more I read the more depressed I get, there was an article in The Times on Saturday saying lenders are putting interest rates up to stop people applying for mortgages during this transition period and creating a back log, brilliant!

This is nothing new, lenders do it all the time.

Issue low rates, get loads of business, allocated tranche of cash is exhausted, now got too many applications to deal with, increase rates to stem the tide of applications.....

Have either of the two posters actually spoken to lenders or brokers to discuss their affordability now? Just because one lender reduces your borrowing to you doesn't mean thats a blanket decision across the industry, each lender has their own interpretation on MMR and what impact it will have on their applicants.....

For example I did a 90% purchase today that was exactly 5x income. I run through the previous lenders who offered 5x income showed that most returned figures lower than 5x income, however one lender was happy to do so, so they are still out there........

Edited by Sarnie on Monday 28th April 22:39

[Fastpedeller]

I know lots are feeling the pain of this, but in the long run it's good for the man in the street. The ever- increasing price of housing isn't a good thing for the average man....... I blame Kirsty and Phil for driving this up by saying 'look they've made a profit!'
Unfortunately these rules weren't used in the last 20 years, so we have the sad situation we are now in.

[anonymous-user]

I hate Kirsty she annoys me

[kmpowell]

Sarnie said:

For example I did a 90% purchase today that was exactly 5x income. I run through the previous lenders who offered 5x income showed that most returned figures lower than 5x income, however one lender was happy to do so, so they are still out there........

Edited by Sarnie on Monday 28th April 22:39

Without wishing to hijack this thread, you sound like you're a broker? If you are do you mind me picking your brains for a moment... we're looking for a 2yr fixed 85%LTV, and the cheapest overall deal being offered to us is an accord 3.09% (5.99% standard) which has £349 fees, £250 cashback and free valuation fee. How does that currently compare in the market, and how swift are Accord at the moment for processing?

[Sarnie]

kmpowell said:

Without wishing to hijack this thread, you sound like you're a broker? If you are do you mind me picking your brains for a moment... we're looking for a 2yr fixed 85%LTV, and the cheapest overall deal being offered to us is an accord 3.09% (5.99% standard) which has £349 fees, £250 cashback and free valuation fee. How does that currently compare in the market, and how swift are Accord at the moment for processing?

Just so you know, there aren't any Accord products with £250 cashback and all Accord products have a £130 application fee also.

Also, without knowing your full details, there are cheaper products than that but there may be reasons why you've been offered that product. At 85% there is a 2.79% fixed rate elsewhere, feel free to PM me

[kmpowell]

Sarnie said:

kmpowell said:

Without wishing to hijack this thread, you sound like you're a broker? If you are do you mind me picking your brains for a moment... we're looking for a 2yr fixed 85%LTV, and the cheapest overall deal being offered to us is an accord 3.09% (5.99% standard) which has £349 fees, £250 cashback and free valuation fee. How does that currently compare in the market, and how swift are Accord at the moment for processing?

Just so you know, there aren't any Accord products with £250 cashback and all Accord products have a £130 application fee also.

Also, without knowing your full details, there are cheaper products than that but there may be reasons why you've been offered that product. At 85% there is a 2.79% fixed rate elsewhere, feel free to PM me

Thanks, I've dropped you a message.

[blank]

I'm sure Sarnie will advise but if speed is of the essence don't bother with Accord!

For me they were slow and regularly asked for more documentation, adding another week for someone to read it. Then asked for more. This was before MMR!

They also took my first direct debit twice, but were good at sorting it out.

[kmpowell]

blank said:

I'm sure Sarnie will advise but if speed is of the essence don't bother with Accord!

He's been a legend. He's spent the day sorting out my dilemmas and in the process he's saved me a packet!

My mortgage purchase is now firmly going in Sarnie's direction.

Edited by kmpowell on Tuesday 29th April 18:25

[Sarnie]

kmpowell said:

He's been a legend. He's spent the day sorting out my dilemmas and in the process he's saved me a packet!

My mortgage purchase is now firmly going in Sarny's direction.

Did I mention I was going on Holiday tomorrow for two weeks?

Glad to have helped!

[Jimmy No Hands]

I'm 3/4 through my application for our first house. Going through Halifax. As we started the process about 6-7 week ago we've only provided one pay slip for me and three for my partner (as a lot of her income is performance bonus based) and they were satisfied with that. Only 5% deposit (10% made zero difference to the rate) on the mortgage guarantee scheme, which as I understand is essentially help to buy for older properties. Means we are stuck on a rate of about 5.4% for 24 months.

As thus haven't requested any more from us, although we both bank with them and have all our accounts with them. Just waiting back for the legal team to "okay" the lease agreement I forwarded as it's a freehold 'flat' (detached converted mill)

It's a long tedious process and it's probably taken us 10 weeks in total to even get to this stage and we've only just really initiated proceedings on the conveyancing side.

I don't like being an adult.

Edited by Jimmy No Hands on Tuesday 29th April 20:35

[P-Jay]

Sarnie said:

kmpowell said:

Our story so far...

- We had an offer in principle a few weeks ago.
- We put an offer in on a house last Wednesday and it was accepted.
- We asked for the mortgage wheels to be put in motion, but were told we'd need to re-apply due to the MMR.
- This time around we were asked to declare our forthcoming child care costs (£900pcm), and my partners maternity leave which finishes next month (she goes back to exactly the same job, pay etc)

Under the new rules the total amount being offered to us had dropped from £530k down to £400k! Luckily we only need £300k, however that's still quite a drop.

We're still waiting to hear back if we've been successful, however our broker doesn't think it'll be a problem given we're not after the full amount and we both earn good salaries.

I do have some serious worries though. What on earth is this change in the rules going to do to the market?!? Less people being accepted means less people in competition, meaning less demand. Also as previously pointed out in this thread, what's going to happen to the people who were accepted when stretched, now going for remortgage? They'll either have to swallow the increased standard rate, or be repossessed...

We're buying at the top of the market inLondon, and I can't help feel worried, but is it just FTB jitters?!?

Edited by kmpowell on Monday 28th April 21:48

But surely this is a prime example of why MMR has been implemented?

If they'd not asked the question, they would never of known that you were going to have forthcoming childcare costs of £900 per month. That's more than most people's mortgage payment.

If you fell in to arrears with your mortgage and you went through your expenditure with the lender and disclosed what you were paying out, they'd previously rightly say that they didn't know that you were going to be having such high child care costs, to which you'd rightly say that they never asked you about future costs.

This is why MMR has been brought in. You are fortunate that your income is sufficient to swallow the reduced affordability and is why it's right that you are still able to secure the lending that you require.

There's going to be a long bedding in period in my opinion as people have to adjust to the new regime and what their lending capacity now is....

In total agreement, this is the EXACT reason why MMR has been implemented - to save the terminal stupid from themselves - Kmpowell ask yourself this - with your current income / expenditure could you really afford to repay a half-million pound mortgage and still have any sort of lifestyle?

To be clear, I'm not accusing anyone here of being stupid - as proven Kmpowell was/is borrowing a sensible amount as proven by MMR Calc - but I saw I lot of it in the 2000's people saw a max lend and went all gooey eyed looking at little palaces and didn't consider all their outgoings. Mental but true, I've seen lots of income/expenditure questionnaires attached to credit apps for cars which showed they were currently spending more than they earned every month and they wanted to borrow more!