'Are affordability rules stopping you getting a cheap remortgage?' blog discussion 10 November 2014 at 5:17PM in Martin's blogs & appearances & MoneySavingExpert in the news 20 replies 9.2K views

Former_MSE_Paloma

This is the discussion to link on the back of Martin's blog. Please read the blog first, as this discussion follows it.

Read Martin's "Are mortgage affordability rules stopping you getting a cheap remortgage?" Blog.

Please click 'post reply' to discuss below.

VT82

MSE_Martin wrote:

It means you are on an expensive mortgage deal and are being told you can’t afford to move to a cheap mortgage deal – nonsense, you can certainly afford to pay less, more than you can afford to pay more. If that is happening, the system is broken.

This sounds like a valid interpretation, but it is a bit misleading.

The point of affordability checking is that it only needs to be done by the bank being asked to lend the money. It is their money at stake after all. The affordability checking that was done by other banks earlier in the customer's mortgage history, and therefore any deal they are on at the moment, is irrelevant.

Let's say the borrower is asking Bank B to pay money to Bank A so that the borrower can repay their mortgage at a lower rate to Bank B. But Bank B doesn't care what the borrower has been paying Bank A - if the borrower doesn't meet Bank B's affordability criteria, even with the lower mortgage payment they would be getting, Bank B will decline to offer the money, and furthermore might think that Bank A shouldn't have lent them the money in the first place.

'Nonsense' it may be. But banks have a duty to lend responsibly, and in accordance with the regulations in place at the time.

And in terms of people being mortgage prisoners, when you take out a mortgage, even if you only expect to have it for two years, the contract will explicitly say what will happen to the rate after the incentive rate is up. It's buyer beware - repay your mortgage in full, move to a new lender, or see if you can product switch with your current lender. And if you can't do any of those, well tough, it was in black and white what would happen to your mortgage rate.

spikyone

Agree with all of VT82's points, and on top of those, the 'new' criteria are factoring in risk that previous criteria did not; namely, that the base rate will rise. The interest that banks charge has to cover not only their costs plus some profit, but also the risk of defaults. Whilst the increased risk of defaults in the event of rate rises should previously have been priced into mortgage rates, it appears that for whatever reason, it wasn't.


You'd also have to question who this is affecting. There is a responsibility for both lenders and borrowers, when any sort of loan is taken out. Many who borrowed over the past 5-6 years have seen low interest rates and the lower repayments they bring, and taken out a mortgage under the misapprehension that it was always that way, and always would be. If the increased rates that those people are being forced to pay when remortgaging have suddenly made their mortgage unaffordable, they probably shouldn't have borrowed that much money in the first place.


As with the payday loan industry, the problem appears to be a general consumer greed and expectation of entitlement to a certain lifestyle, as much as it is the bad practice of certain lenders.

itstwins2_2

I am now about to finish my fixed rate mortgage, and will be using the companies SVR. I have spoken to several mortgage advisors that have advised me they cant get me a deal. My mortgage is £91,000, for a property worth £160,000. I have excellent credit, am working and overpay my current lender every month. I don't wish to borrow extra just switch to a better deal. the reason given for no mortgages available is that as a single parent who works part time the wages vs benefits is too much of a difference and I won't be accepted on this basis. Funny how that didn't matter 2 years ago when I got the mortgage! Surely my overpayment every month to the mortgage shows that affordability is not an issue.

npw32jnw

I went for a remortgage recently, and had planned my budget out properly in advance, had over £300 disposable income spare per month, and was still told that I couldn't meet the eligibility requirement. This was despite the remortgage being a 5 year fix, and 2 loans totalling £400 per month ending during that time! I was told what amounts I needed to meet in terms of that extra income by the mortgage advisor, so I was able to go away, fudge the figures (there were items that I had in one category, that they would class in other categories and I just needed to make sure I wasn't double counting things) and meet the eligibility criteria!!! So all in all it was a completely pointless exercise, and simply added a couple of weeks onto the whole process, for exactly the same outcome. What irked me was that none of this was properly explained before the first meeting with mortgage advisor, had it been, I could have prepared better the first time.

I take the point made that just because you were originally given a mortgage, it does not mean that you could properly afford it, but it seems to me that if your payments are going down, and you have plenty of capacity in your figures, then this should be taken into account. Here it was a 'computer says no' situation.

I also comment that my previous mortgage was 10 yrs ago, well before the historic lows, and so I was not necessarily in any misapprehension about interest rates, indeed I was aware of impending rises so thought I would look to get a better interest rate now, capped for a while.

The key point Martin makes is that for those who can clearly afford the repayment now, and have capacity within their budgets should rates go up, remortgaging should not be such a complicated process, purely because of the affordability criteria. However in my case it nearly prevented me from getting a better deal for no positive reason, whether on my part or the bank's part.

threespires

Although not remortgaging I had a similar issue when trying to change the outstanding term on my current mortgage. I didn't want to borrow any more, and had already made some lump sum overpayments, just pay the remaining balance off sooner. The BS referred me to an external mortgage consultant; they said I would have to go thorough interview, ID checks and evidence of earnings - possibly more than when I took the mortgage in the first place.
Eventually based on their strongly-worded advice I agreed to keep the mortgage term the same and arrange to make monthly overpayments.


Seems really complex and onerous. Between 2012 and 2013 I had shortened the term twice by just a chat at the BS counter. They knew I had always paid on time and were happy to adapt; didnt even charge any admin fee. Now in 2014 there are all these bureaucratic barriers which make it much harder to exercise choice in repaying my existing loan.

Hubeedoo

My LTV is 65% according to Accord mortgages - they've recently moved to me to a more expensive variable rate following the end of the fixed two-year term. I have an excellent history having never missed a single payment for anything, and although I do use credit cards I'm by no means a risk. My father is my mortgage broker and has tried more than a dozen of the top lenders, none of whom is willing to offer a deal because of these ridiculous affordability rules. I'm told that the Halifax said they'd lend us an extra £50k if we were buying a new property and did not have credit cards, but would not offer us a deal to remortgage our current property because we might go out and spend £50k on credit cards. Yes, and we might also win the lottery. But based on what we know.... So now we're stuck paying an additional £90 per month with Accord as we are at risk of not being able to afford a mortgage if the rates rise in the future - isn't the point here that I'm trying to get a FIXED rate deal???!! A case of 'computer says no'. Feel very frustrated that these rules are now actually damaging us financially.

jamesd

Not so much affordability as availability in my case: an interest only mortgage where I may want to move and borrow more. Current income multiple is less than one, loan to value 75% or better, repayment vehicles have twice the mortgage value outside a pension, another three times in pension and available in three years. 17 years term remaining. Investing more than 60% of my (net income plus gross pension contributions). But just where do I get a new interest only mortgage in some sort of competitive market?

Not directly relevant but just what lender can sensibly regard pension contributions that will exceed 50% of my gross income next year as committed expenditure that I can't reduce if necessary? Not a chance that I'd continue pension contributions at that high a level if the choice was that or make the mortgage payments.

carolinemck

Yes! We were turned down by Barclays, who said they are a responsible lender, who took £1000 out of my account then denied they had done and said to me 'prove it' when I asked them to return the money. And even when I did 'prove it' I still had to chase them to return it. We are in a better financial state now than when we first got our mortgage & our mortgage is our only debt. We make overpayments every month & have never missed a payment. The remortgage payment was over £100 cheaper per month but we were told 'we don't think you can afford this going forward'.

wendyt1974

Having been tied to NRAM for a number of years waiting for sufficient equity to be available in property I was excited to see a Barclays loyalty mortgage to 90% LTV with minimal checks as I have banked with them for many years. Despite earning a high salary and having an excellent credit rating imagine my surprise when I was told that I coild not have the remortgage as the typical NRAM set up involved a mortgage and an unsecured loan taken as a single monthly payment. Beware if you too think that you are a loyal Barclays customer in the same situation they will only remortgage on similar loan types. I have worked in banking for 17 years and despite having marketed mortgages I have never come across this criteria. HSBC have no such nonsense and their remortgage service has been excellent. The Barclays complaint team weren't too useful either!

KatyI

I've just read all the blogs on the main page and I'm so shocked that these banks/building societies are getting away with this when (as mentioned by Ian and then responded to by Martin himself) the government passed a law in 2012 protecting people from exactly this.
I was considering asking my mortgage lenders if I could extend my term to pay less over longer......Guess there's no point!
Looks like I'll be selling up earlier than I thought. God knows where I'll go though?
Looking at the bigger picture though, potentially this means that all these people with this issue will never be considered for another mortgage ever again! What happens then?
It's not like there are even enough council houses even if you meet the criteria to get one!
Is property purchasing only for the wealthy now?
and just how big will the poor/rich divide get? Properties will be brought up by these wealthy property landlords and rents will just keep escalating, where does it end?


Martin, I think it's time for you to get on your soapbox again, shout about it as only you can.....only you seem to get results!
But I assure you we will all be behind you 100%.
Ill even march if it helps!