Borrowers with dependents and low incomes hit hardest by MMR

Borrowers with dependents and low incomes have been most affected by the Mortgage Market Review (MMR), which imposes new limits on mortgage lending.

However the survey of lenders and brokers by the Intermediary Mortgage Lenders Association (IMLA) found that opinions are split about how much impact the MMR was having.

Almost two thirds of brokers believe significantly more borrowers are being turned down as a result of interest rate stress tests, but just 15 per cent of lenders agree.

The difference is likely to reflect the fact that while lenders are reporting on trends within their individual businesses, brokers working with multiple lenders have a view across the wider market.

However, both parties do agree that stress tests have had more of a direct impact on the amount consumers can borrow, compared with other changes to the MMR approval process.

Four out of five brokers believe interest rate stress tests have reduced the amount that can be borrowed, compared to just over half of lenders.

It may also be the case that brokers are advising some borrowers against submitting an application to lenders, based on a discussion about their finances and needs.

One in three brokers feel that stress tests have reduced loan sizes by more than 10 per cent.

The majority of lenders (71 per cent) and brokers (58 per cent) believe that MMR will have a positive effect on consumers by improving the quality of advice they receive.

Four in five lenders (81 per cent) also believe the changes will improve consumers’ awareness of mortgage affordability and their related expenditure, with 61 per cent of brokers agreeing.

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Whose borrowing has been most limited by MMR?

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