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Homeowners feel force of tougher mortgage rules

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Written by: Samantha Partington
30/07/2014
Homeowners are starting to feel the effects of tougher lending rules put in place to protect borrowers from taking on large debts which may become unaffordable in the future.

A survey carried out by property website Zoopla revealed that 40% of respondents said securing a mortgage was harder now than it was three months ago.

Alongside the Mortgage Market Review (MMR) rules the Financial Policy Committee (FPC) added an extra layer of prudence to lending policies.

Mark Carney announced an income multiple cap of 4.5 times borrowers’ income, stipulating lenders must not hold more than 15% of their new loan book on high loan-to-income (LTI) ratios.

The FPC said lenders should apply a stress test to assess if borrowers could still afford their mortgages if, at any point over the first five years of the loan, Bank base rate were to be 3% higher than the rate at origination.

This decision led to Santander and Nationwide tightening their affordability criteria last week by introducing blanket LTI caps across all lending.

Lawrence Hall of Zoopla said: “…securing a mortgage appears to be getting harder now that MMR has caused lenders to be more rigorous with their lending criteria and approval process.”

Further findings from the survey revealed that house price confidence had begun to flag, revealing a slight dip in the number of homeowners who thought their property value would rise over the next six months.

Of those surveyed 92% said they thought they would see the price of their home rise compared to the four-year high of 95% recorded earlier in the year.

Amongst the 7,810 homeowners surveyed by Zoopla, the average prediction for house price growth over the remainder of the year stood at 7.6%.

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