New mortgage lending rules come in this weekend

vivatifosi

Just watching article on Sky. Apologies if this has been covered already on here, I haven't seen a thread - had a look through the last month's worth of threads before posting but can only see threads on the mortgage and house buying selling boards which are more about the impact of change on individual cases than impact on the housing market per se. Here's what was said on Sky...

Already seing people turned down.

Burden of proof on earnings much higher.

Checks more intrusive - look at spend on childcare, TV, gym membership, smartphone contracts... anything that is viewed as a commitment.

Changes were thought of at the height of financial crisis but only just coming in.

Some questioning whether reforms are necessary. Days of 'no questions asked' mortgages are over.

Want to go through income with a fine toothed comb. Look at everything... food spend, holidays, etc. Test no longer just on income but on spending patterns.

Expert: it's good that people won't be able to rush in and over-commit, but many people willing to cut back on things that they have at the moment may be shut out.

Question as to impact on housing market... in the south east not everyone needs a mortgage - BTL is a different issue, investment in London a different issue... may impact on the nuts and bolts of normal lending though.

Some articles about it:

http://www.theguardian.com/money/2014/apr/12/need-mortgage-new-rules-lenders-check
http://www.independent.co.uk/property/how-will-new-mortgage-rules-affect-potential-homebuyers-9227784.html
http://www.bbc.co.uk/iplayer/episode/b041469n/Money_Box_New_mortgage_rules/

What do you think about it?

Graham_Devon

I can't quite believe that should you have a "takeaway friday" that you will be declined for a mortgage. Just seems totally absurd.

There is, it seems, a lot of what could be hyperbole being shouted by those in the industry who don't want to see the changes take place.

I mean, seriously, the only way they are going to be able to tell what we have spent on say takeaways is by relying on the fact we pay by debit card. What if we use Just Eat and pay via paypal? Still comes out of the bank, just as an unknown paypal transaction.

Just think theres a lot of shouting from vested interests and therefore a lot of hyperbole about people being refused a mortgage if they have the audacity to eat out a couple of times a month.

It will likely impact mortgages, sure, as that's the point, but the impact will be felt most likely be those who can least afford the mortgage.....not those who simply have a mobile phone contract.

Again, articles talk about applicants being rejected if they have a smartphone. How on earth will the bank know you have a smartphone? They know you pay a mobile phone company and that is it.

sulphate

I can understand and agree with lenders looking at financial commitments such as direct debits, mobile phone contracts, child care costs, and in other words any contract or commitment that is unlikely to change in the near future. We were asked questions about these when we first took out a mortgage last year.

However I think that looking at things like holidays and meals out is slightly over the top because most people budget for their bills and mortgage before deciding on luxury spends so if they can no longer afford/justify a takeaway twice a month most people would be happy to sacrifice it if it means paying the mortgage/being approved for one.

chucky

vivatifosi wrote: »

Want to go through income with a fine toothed comb. Look at everything... food spend, holidays, etc. Test no longer just on income but on spending patterns.

Expert: it's good that people won't be able to rush in and over-commit, but many people willing to cut back on things that they have at the moment may be shut out.

I'm surprised that this hasn't been put in place before.

Buying is and should be a big sacrifice, it's not an entitlement that everyone is able to do and still maintain the life and spending patterns previous to buying.

movilogo

Any event that can prevent house price going thru roof must be a good thing

CLAPTON

movilogo wrote: »

Any event that can prevent house price going thru roof must be a good thing

this measure will stop people buying a home to live in and encourage small landlords to buy them instead and raise their rental prices: it will probably lead to fewer new properties being built.

sadly a predictable 'unexpected' side effect

purch

vivatifosi wrote: »

What do you think about it?

There could be a danger of chucking the bambino out with the bathwater here, but a return/start of more sensible lending practices should be welcomed.

My expectation is that it will start with some or all Lenders being extremely vigilant, and will probably lead to some relaxation of the criteria as time passes.

Some "jobs worth" type scrutiny will inevitably lead to people not being able to access funding when they should have been able too, but these things will be ironed out over time.

Conrad

CLAPTON wrote: »

this measure will stop people buying a home to live in and encourage small landlords to buy them instead and raise their rental prices: it will probably lead to fewer new properties being built.

sadly a predictable 'unexpected' side effect

As I bore you all to death with, the original tightening from 07/08 was a gift for landlords, this is another.


You just want to meet these regulators, they are a breed apart, utterly out of touch with reality, with a very prescriptive view of Humanity whereby grown adults cannot be trusted to make good decisions despite repossessions the vast majority of mortgagees managing to retain their home.


This is a gift for locusts like me to, as I am even more in demand. None of this is great for the consumer.

BillJones

Graham_Devon wrote: »

I can't quite believe that should you have a "takeaway friday" that you will be declined for a mortgage. Just seems totally absurd.

There is, it seems, a lot of what could be hyperbole being shouted by those in the industry who don't want to see the changes take place.

Er, what?

It's you, just up there, complaining that it's "ridiculous" that affordability will be examined too closely, not those in "the industry"

I do work in the industry, and welcome with open arms the coming of a time when we lend more responsibly. Look at the stories on here of people who borrow what they can't afford. Reining it all in is an excellent idea.

wotsthat

Graham_Devon wrote: »

It will likely impact mortgages, sure, as that's the point, but the impact will be felt most likely be those who can least afford the mortgage.....not those who simply have a mobile phone contract.

If there's going to be mortgage restriction then shouldn't those least able to afford a mortgage be most affected?

The Indian takeaways & smartphones nonsense is just journalistic bait.

I'd be surprised if lenders weren't already scrutinising affordability criteria to an extent that meets the new rules.

Doozergirl

Our next door neighbour had Natiowide mess up their mortgage application on their new house. He applied for a mortgage for them on their own house. The first they knew was when the valuer turned up on their doorstep.

They have had to apply again and this time, went through the Spanish Inquisition with the same mortgage man for the same thing. Questions about their hobbies, if they gave money to their daughter at university etc.

I don't see it's any of their particular business. You cut your cloth accordingly. If take away Friday has to stop because you have a new mortgage, so be it.

They've had to take the wife off the application because she doesn't have a pension and will go over 60 before the mortgage ends. It seems ridiculius that the same organisation who has provided them with a mortgage for the last 6 years, maybe more (on the same term) now doesn't trust her to pay what she's always paid. The houses are only £7k apart in value.

The only people to lose will be the mortgage company, if then ex-neighbours do fail to pay the mortgage, when they only have one person to chase.