'Are affordability rules stopping you getting a cheap remortgage?' blog discussion

KatyI

Well done to you girl, but just wondered how do you manage to pay a £91,000 mortgage with overpayments only working part time and claiming benefits????

KatyI

Sorry that previous post of mine was addressed to "itstwins2" How did she do it?????

Anothername...

I'm on a 5 year fix at 4.99% and i'm unable to secure a remortgage with a different and cheaper lender. My mortgage deal ends in Feb and i've been shopping around for months. My issue is that my Mum (age 69) is on my mortgage as I don't earn enough for the amount i need to borrow (£70,000). As a working but lone parent, it is hard for me to increase my income and my hours have been reduced over the last few years as i work in a library. My Mum doesn't pay anything towards my mortgage (£483 per month) and doesn't contribute in any way to my living costs, she is just on the mortgage so I could borrow enough for my house. I keep being told that, despite there being deals out there that could reduce my payments to £360 per month, I just don't qualify as I don't earn enough and my Mum will turn 75 when the mortgage will still have 13 years left to run. It seems a crazy system where I am paying £483 per month with no late payments or arrears in 10 years and I'm told I can't afford to pay £360!! Things are so tight for me and, as we are currently being restructured at work, I am looking at losing even more hours. The extra £120 would make a massive difference to me. I've always had a fixed rate mortgage as there's no room in my budget for increases so have also been unable to take advantage of the lower interest rates. I feel completely trapped...

Percy1983

I don't really see the new rules as ridiculous, I will say I got in before the the rules but on self testing before applying we figures we could deal with rates around 24%.

Got a few more years left on the current fix but not too worried about what happens when it ends (my terms are a reasonable SVR at the end of the deal if I can't move).

PBA

While the new rules have made it harder to get a new mortgage, they've also made the process more expensive for banks to acquire new customers. As a result they are keener than ever not to let existing customers leave. Most lenders now offer the same deals to existing customers as they'll offer to new ones, and a few even offer better deals to existing customers. As other posters have mentioned affordability rules only apply when setting up a new contract, so arranging a new deal with the existing lender should be a much more straight forward application than moving lenders.

kingstreet

http://www.mortgagestrategy.co.uk/2016292.article?cmpid=msbreak_683560

Lenders fear retrospective action over transitional arrangements

Lenders say the transitional arrangements written into the MMR are not being used properly as they fear retrospective action from the regulator.

The intention of the transitional rules was to help existing borrowers who would have become unfairly trapped with their lender as a result of the MMR.

The transitional rules allow lenders to waive affordability checks and interest-only rules for borrowers who may be trapped under the new rules as long as the customer does not wish to borrow more money, there is no “material impact” on affordability and they have a good payment history. They apply to borrowers staying with their current lender and those who want to switch to a new lender.

But brokers have complained that most lenders are applying full affordability checks on borrowers and subsequently rejecting the application to switch to a cheaper product, even though the transitional arrangements mean they do not have to.

Speaking at a roundtable hosted by Ipswich Building Society last week, Ipswich chief executive Paul Winter said lenders fear what the regulator will think if they take advantage of the transitional arrangements.

He said: “Most of that [not implementing the arrangements] is around the fear of what will the regulator say when it comes and visits and we have all of these cases that appear to fail affordability.”

While BSA head of policy Paul Broadhead (pictured) said it would be “unforgivable” for lenders not to apply the rules to existing borrowers, he agreed that lenders were nervous of the regulator, which has itself expressed its concern that the arrangements have not been used as expected.

Broadhead said: “I think warnings like ‘be afraid, be very afraid’ and ‘shoot first and ask questions later’ when the regulator was born were still very much ringing in lenders’ ears [when the MMR was introduced].

“While the FCA has since softened its tone, there is still an element of nervousness among the lending community as about how they deal with some of the more open-to-interpretation elements of the rules.”

Association of Mortgage Intermediaries chief executive Robert Sinclair says: “We have heard of situations where the customer has been told they cannot afford a new loan despite it being hundreds of pounds less than the revert-to rate they are currently on.”

The roundtable panel added lenders may be less fearful after two MMR thematic reviews are published next year as they will have an idea of what bad practice looks like when it comes to applying the transitional arrangements.

However, Sinclair says: “I think some of them are waiting to see what comes out of that but that will not appear until next June. So if they then want to take changes to policy through the proper processes, then consumers won’t see any change until November next year. That is too long for me in some circumstances.”

michaels

I suspect it is crocodile tears the banks are crying when they say they want to offer the lower rate to existing customers but can't because of the rules.

For the banks having a trapped customer on a high svr who can afford to pay it is like Christmas come early. If the customer can't go elsewhere because the rules have changed then or course the banks will gouge them.

Joanne134598

Today I tried to change the rate of my existing mortgage.
I have a 16 year old interest only mortgage with 7 years to go, and have a rate of 3.99%.
I contacted Halifax BS to change the rate to their current offer……1.79% fixed for two years. Unfortunately I found out this wasn't possible without the affordability checks. Halifax are insisting on payslips and current endowment statement. Income isn't a problem as this is substantially better than 16 years ago. The problem arises with the endowment which has a shortfall of £10,000.
I don't see why I should give this information when I'm not asking to borrow any more money. Halifax informed me that if we fail the affordability checks, they will insist on making part of our mortgage repayment.
I've explained that we have savings that would cover the shortfall and the probability of a large inheritance within the next 7 years.
The mortgage is £74,000 and our house is currently worth £250,000.

ellendexter

Please Martin, do everything you can to stop these affordability checks being insisted on for existing customers trying to change to a better rate without any extra borrowing. First Direct are insisting they need to do an affordability check before they will even talk to us about changing rates. There's no point us even trying, as our financial situation has changed drastically since taking out the mortgage 2 years ago. So we are stuck paying nearly double the interest on the SVR as we would be if we could take out a new fix with them. We are trapped by their insistence on the "affordability" check, which is ludicrous nonsense-obviously a cheaper rate would be more affordable! And I do believe they are deliberately hiding behind these new rules as they must be laughing their socks off at the packet they are making out of their trapped customers every month. I feel sick we are throwing away £hundreds every month due to this. If we could save it instead we could probably shorten the term by several years. After all the effort we all go to to save a tenner or so a month by switching energy supplier, comparing insurance deals, eating more cheaply, etc etc etc and then £hundreds are being wasted on an uncompetitive mortgage rate and there is nothing we can do about it. Fingers crossed please please please that you can secure a right to switch rates with no affordability check if no extra loan is being asked for.

julebrighton

I have paid my mortgage on time EVERY month for 20 years, with the same company, I have a excellent credit rating, yet they will not let me have a good deal - Now I have gone to standard variable - they will not take into account how I live ie having students, my husband putting in the pot (he is self employed with average accounts but will not add him). Madness - how do I sent Martin an email as I heard he is campaigning?