The Mortgage Market Review, is it being applied too harshly by banks and building societies?
07/01/15 | Posted by: admin
Since the Government’s Mortgage Market Review came into effect in April, banks and building societies have been accused of applying the new rules too harshly resulting in many mature borrowers being refused mortgage applications. Paul Tilley, Chief Executive of Earl Shilton Building Society puts the record straight.
The Financial Conduct Authority (FCA) claims lenders have misinterpreted its new rules; it argues the rules do not aim to discourage lending to mature customers and is urging banks and building societies to focus on affordability rather than age as a key deciding factor in whether a mortgage application is successful or not.
The new rules have meant that meeting the criteria for successful applications is definitely a lot tougher. Borrowers are now being asked to provide more in-depth information regarding their monthly income and outgoings and everything from travel expenses to childcare are being carefully scrutinised, resulting in an overall extension of the mortgage application process.
Applicants are also being assessed on how they would cope with a rise in interest rates; this means that as well as working out if a borrower can afford a mortgage at the current interest rate, we also have a responsibility to check that they can afford monthly repayments at a higher interest rate as well. Although strict, the hope is that the new rules will lead to better lending and will protect the borrower in the long-term.
Many banks set an upper age limit beyond which they will not lend which typically stretches to between 65-80. However we believe the income of mature borrowers, such as those on a pension, can be very stable and as a result the industry should not be using age as an automatic bar to getting a mortgage.
Following complaints that over 50s are struggling to be accepted for mortgage applications, the FCA has said it will be looking more closely at how banks and building societies are interpreting the rules in the future and this is something we support.
Here at Earl Shilton Building Society our expert mortgage team undertakes an individual assessment with all mortgage applicants to analyse their circumstances and tailor our advice in their best interests which includes allowing, where appropriate, borrowers to repay their debt into retirement.
When looking at whether a mortgage application will be successful or not affordability and a good credit history are some of our key requirements. Lending prudently has always been an objective for us; therefore we carry out robust checks to ensure that each individual will be able to afford mortgage repayments now and in the foreseeable future.
To find out more about applying for a mortgage with us visit our Earl Shilton or Barwell branches and ask to speak to a member of our mortgage team. Details of our mortgage products including key features, terms and conditions and administration fees can also be found online at http://www.esbs.co.uk/mortgages/mortgages-introduction
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE