First-time Buyers
Buyers confused over mortgage rules
Almost 18 months after new mortgage rules were introduced, many buyers are still baffled by the changes in the market.
April 2014 saw the introduction of the Mortgage Market Review, designed to better regulate the mortgage market and ensure only financially sound borrowers were able to take out a loan.
However, research by Ocean found that 35% of potential buyers remain confused about what these changes mean for them.
In addition 31% of people were unaware that the rules had changed at all, despite almost 18 months having passed.
Under the new rules borrowers face a more detailed examination of their finances when they apply for a loan. Lenders look in depth at income and outgoings but 70% of borrowers were unaware of this fact.
Some 25% said that they had not changed their spending habits at all before applying for a loan. Those who had cut down spending on treats but many people said they had started paying less into their pensions or ended their life assurance policies.
The vast majority of people surveyed were unaware that the new rules tested whether borrowers could cope with an interest rate rise.
People were turning to mortgage brokers for assistance, with a fifth of would-be buyers seeking professional assistance.
Gareth Shilton, Ocean spokesperson, said: “More than a year after the new mortgage rules were introduced, potential buyers are still in a state of confusion about what they mean in reality. Even more worrying is that a large chunk of people who are gearing-up to apply for a home loan are not even aware that the mortgage rules have changed.
“As an industry, we need to do more to educate buyers and to guide them through a process which many people are finding understandably daunting.
“For anyone who plans to apply for a mortgage in the next year, it’s key that their finances are in order, including checking their credit file and gathering all their paperwork early to show as evidence. They would also be wise to cut back on non-essential spending such as takeaways and subscriptions, and to ensure that bills are paid on time so they demonstrate that they can consistently live within their means and stick to a budget.”
