Changes to the mortgage application process under the Mortgage Market Review (MMR) are due to come into immediate effect on 26 April 2014.
The new rules aim to ensure that only those who can afford them are able to secure a mortgage.
The Conveyancing Association (CA) argues that while the changes are not a negative development, first time buyers may face a greater challenge getting a foot on the housing ladder.
Kathryn Taylor, a spokesperson for the CA and managing partner at Gordon Brown Solicitors Law Firm LLP, considers the implications of the change:
“Across the board, we are likely to see mortgages issued on a much more cautious basis by lenders. This is not necessarily a bad thing but may impact on the property market as a whole.
“It is first time buyers who have, until recently, benefitted from schemes such as Help to Buy, that are likely to be most affected by the changes. More stringent rules will require mortgage applicants to outline ‘basic living costs’ – which will inevitably be higher for these buyers, who will be looking to buy furniture, for example, for their new home.
“The changes will apply to all mortgage applications – including those made under the Help to Buy scheme.
“Under the new rules, those who may have been hoping to benefit from the government’s 95 per cent mortgage loans will be subject to the same scrutiny as regular mortgage applications – which ultimately require buyers to be better prepared to cope with their mortgage repayments, in the long term.
“As the economy picks up, the changes are designed to ensure that home buyers can secure a loan in the knowledge that they are unlikely to run in to trouble further down the line.
“After the 26 April, those looking to buy a home should be prepared for a slightly longer process than they may have originally expected – with the possibility of slightly increased costs too.”
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