The Mortgage Market Review (MMR), a new set of rules imposed on lenders last April, seems to have affected a large number of consumers, according to new research from information services company Experian.
A year after the change in the mortgage affordability criteria, almost half (45 per cent) of those planning to buy a home in the last twelve months failed to do so, the survey found.
Over a third (37 per cent) say the MMR changes made them feel less in control of securing a mortgage and a quarter blame the new rules of making them less able to secure a mortgage.
A positive note here is that some of those negative experiences could be avoided. There are ways for consumers to prepare for taking out a mortgage and make it easier to get an approval from their lender.
Experian’s latest insight report, The Mortgage Muddle – One Year After The MMR, revealed that among those who were unable to buy since the introduction of the MMR, many still appear to be overlooking the basics in financially preparing to apply for a mortgage. Almost half (46 per cent) have never checked their credit report, meaning they have no indication of how a lender might view their ability to repay money.
James Jones, head of consumer affairs at Experian, commented:
“Preparation is the key to successfully navigating the mortgage market post-MMR. Understanding the affordability rules and how a lender makes their decision is the key to success. But it can take time to build a positive credit history and a solid track record of positive money management, so it’s important you start preparing as soon as you make the decision to buy.”
Experian shares a few simple tips to help people prepare for a mortgage application:
- Know what you have to spend: Consider what funds you can draw together to form your deposit. The size of your deposit will often dictate how much you face in terms of interest rates and lender fees.
- Do your research: Use mortgage calculators and comparison websites or speak to a mortgage adviser to find out where the best deals are and what type of mortgage will suit your circumstances. Work out what you can afford to borrow and repay, both now and if rates rise by 1%, 2% or more.
- Scrutinise your spending: Scrutinising your last few months’ outgoings carefully will help you understand exactly where your money is going. Prepare now by building good habits like increasing the amount you save, clearing overdrafts and cutting back on discretionary spending to ensure you close out the month with even a small surplus..
- Check your credit report: As soon as you make the decision to buy, check your credit report with all three credit reference agencies. Ensure everything is accurate and up to date and reflects your current circumstances – e.g. that all of your open credit accounts are recorded and that any old accounts have been marked as “settled”. If you spot anything you believe to be inaccurate, contact the relevant credit reference agency and ask them to investigate the entry with the lender.
- Room for improvement: If your credit report has areas for improvement, make a plan to get it into shape well before making your mortgage application. There are a number of steps you can take, including: ensuring you’re registered on the Electoral Roll; paying down outstanding balances to less than 50% of your limit; paying off more than the minimum repayments on your accounts each month and making sure never to miss a repayment.
- Don’t fall at the last hurdle: Right before you make your application, take time to do some last-minute checks. Check your credit report again to make sure nothing has changed and everything is accurate right before you apply. Check the exact way your address and other personal details appear on your credit report. Small inaccuracies could see your application turned down, so don’t overlook the details.
