Almost three quarters (72 per cent) of aspiring homebuyers in the UK do not know what the Mortgage Market Review (MMR) is, according to a survey commissioned by Experian, the global information services company.
Among the 28 per cent that claim to know what the MMR is, many are confused or ill-informed as to what these new affordability measures mean.
- 43 per cent incorrectly think the introduction of the MMR means they can apply with smaller deposits;
- 19 per cent believe lenders will have relaxed their lending criteria after April 26 2014 – when affordability checks will in fact become much more stringent;
- Only 44 per cent of these respondents correctly understand that it means lenders will be more careful about ensuring mortgage applicants can afford their repayments, both now and into the future;
- Just 15 per cent are rightly aware they will need to speak with an adviser before getting a mortgage;
- 55 per cent of respondents feel more confident about getting a mortgage following its introduction – yet other findings from the Experian report suggest this confidence may be misplaced.
Introduced from April 26, 2014, the Mortgage Market Review aims to make mortgage lending more responsible and stable. However, it does mean that those hoping to borrow to purchase a property will need to show they have considered how they will be able to manage their repayments in the long term – for example, in the event of an interest rate rise.
Affordability
Despite the MMR’s emphasis on affordability, a quarter of all would-be buyers surveyed admit they currently find it difficult to budget each month.
- Half (49 per cent) confessed to overspending in the last month;
- A third had to dip into their overdraft last month – 8 per cent heavily;
- One in seven (14 per cent) say they are unable to cut back outgoings any further.
It appears very few potential buyers are getting their finances in the best possible shape before applying for a mortgage. A fifth (19 per cent) don’t plan on preparing their finances before their mortgage application, while another fifth (18 per cent) only plan on preparing a month prior to their application.
- Only a fifth plan to make a clear six-month budget;
- A quarter (26 per cent) plan to clear outstanding debt;
- A further 15 per cent plan to pay down any outstanding credit;
- Only a third plan on cutting back on luxuries in the lead up to their application.
Jonathan Westley, managing director of Experian Consumer Information Services for UK and Ireland, commented: “The key thing to remember is that the MMR aims to protect people from debt. The MMR will not change who will be lent to, but rather prescribe a more robust and granular approach to assessing a person’s actual or reasonably anticipated income and level of affordability. This is both at application stage and at key points within the life of a mortgage, such as a change in repayment terms or extending the term beyond expected retirement.
“For individuals applying for a mortgage, it important that they think about what they can afford to borrow and repay, including if circumstances change.”
