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    • SouthLondonUser
    • By SouthLondonUser 10th May 18, 2:18 PM
    • 537Posts
    • 78Thanks
    SouthLondonUser
    Mortgage market reformer denied mortgage
    • #1
    • 10th May 18, 2:18 PM
    Mortgage market reformer denied mortgage 10th May 18 at 2:18 PM
    http://www.mortgagesolutions.co.uk/better-business/2018/05/08/exclusive-taste-medicine-blackwell-mortgage-rejection/

    A lady who had worked at the FCA on tougher mortgage lending rules was denied a mortgage because she didn't have two years of income as a self-employed consultant.
Page 1
    • liviboy
    • By liviboy 10th May 18, 2:36 PM
    • 431 Posts
    • 161 Thanks
    liviboy
    • #2
    • 10th May 18, 2:36 PM
    • #2
    • 10th May 18, 2:36 PM
    http://www.mortgagesolutions.co.uk/better-business/2018/05/08/exclusive-taste-medicine-blackwell-mortgage-rejection/

    A lady who had worked at the FCA on tougher mortgage lending rules was denied a mortgage because she didn't have two years of income as a self-employed consultant.
    Originally posted by SouthLondonUser
    Good! As she states in the article, it's not the rules themselves that caused the issue but rather the lenders' interpretation of the rules...and who can blame them for erring on the side of caution given there were threats of big fines for "irresponsible lending".

    This is what happens when regulators interfere in ways which affect the normal customer unjustifiably...

    "stress testing" borrowers to interest rates of 10-15% when the current base rate is 0.5%...and not taking into account that LTV will most likely reduce as mortgage payments are made...

    Removing entirely from the calculation a credit card balance of a couple of thousand pounds when it would be cleared within 12 months...yet that £2,000 is removed, in its entirety, from a customer's income for affordability and lending calculations rather than as a one-off sum... so that £2,000 is multiplied by 25 or 30 years....

    MMR rules have made mortgages much harder for normal working folk who can otherwise afford current mortgage payments or indeed rent payments without any issue...

    It's annoying and perhaps getting a taste of her own medicine will make her reflect when she is "consulting"...
    • ACG
    • By ACG 10th May 18, 2:48 PM
    • 17,147 Posts
    • 9,045 Thanks
    ACG
    • #3
    • 10th May 18, 2:48 PM
    • #3
    • 10th May 18, 2:48 PM
    Good! As she states in the article, it's not the rules themselves that caused the issue but rather the lenders' interpretation of the rules...and who can blame them for erring on the side of caution given there were threats of big fines for "irresponsible lending".

    This is what happens when regulators interfere in ways which affect the normal customer unjustifiably...
    Originally posted by liviboy
    "stress testing" borrowers to interest rates of 10-15% when the current base rate is 0.5%...and not taking into account that LTV will most likely reduce as mortgage payments are made...
    Im not sure where you got that from. They are typically stressed at closer to 8% - FPC recommendations
    In June 2014, the FPC made the following recommendations to the PRA and FCA:

    Interest rate stress test
    !!!8216;When assessing affordability, mortgage lenders should apply an interest rate stress test that assesses whether borrowers could still afford their mortgages if, at any point over the first five years of the loan, Bank Rate were to be 3 percentage points higher than the prevailing rate at origination. https://www.fca.org.uk/firms/interest-rate-stress-test

    Removing entirely from the calculation a credit card balance of a couple of thousand pounds when it would be cleared within 12 months...yet that £2,000 is removed, in its entirety, from a customer's income for affordability and lending calculations rather than as a one-off sum... so that £2,000 is multiplied by 25 or 30 years....
    This is also incorrect. Some lenders will ignore debts with less than 6 or 12 months left to run. With some lenders having £2000 on a credit card will not even affect the amount that can be borrowed.

    MMR rules have made mortgages much harder for normal working folk who can otherwise afford current mortgage payments or indeed rent payments without any issue...
    It has become more difficult to get a Mortgage for certain people because it was too easy. Self cert mortgages, interest only for people who can not afford repayment, 7-8x income - all of these things where it was dangerous to the customer have been targeted. I think that is a good thing. It is easier to get a Mortgage now that it was 5 years ago when I started out as a broker. The difference is how much you can get and who can get them.

    The normal working person should have no issue getting a mortgage.
    Last edited by ACG; 10-05-2018 at 2:50 PM.
    I am a Mortgage Adviser
    You should note that this site doesn't check my status as a mortgage adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
    • kingstreet
    • By kingstreet 10th May 18, 3:34 PM
    • 33,678 Posts
    • 18,263 Thanks
    kingstreet
    • #4
    • 10th May 18, 3:34 PM
    • #4
    • 10th May 18, 3:34 PM
    that £2,000 is removed, in its entirety, from a customer's income for affordability and lending calculations rather than as a one-off sum... so that £2,000 is multiplied by 25 or 30 years....
    Originally posted by liviboy
    Typically, lenders take 3% or 5% of the balance as the cost of the commitment, so £60 to £100 a month. This would impact affordability but not as much as you seem to think.

    Trial different lender calculators with and without that balance and see the difference in outputs.
    I am a mortgage broker. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. Please do not send PMs asking for one-to-one-advice, or representation.
    • liviboy
    • By liviboy 10th May 18, 4:18 PM
    • 431 Posts
    • 161 Thanks
    liviboy
    • #5
    • 10th May 18, 4:18 PM
    • #5
    • 10th May 18, 4:18 PM
    Typically, lenders take 3% or 5% of the balance as the cost of the commitment, so £60 to £100 a month. This would impact affordability but not as much as you seem to think.

    Trial different lender calculators with and without that balance and see the difference in outputs.
    Originally posted by kingstreet
    To give an example. My current lender, with a £2000 credit card balance max prepared to lend was £188,000...without that credit card it was £231,000...that’s a helluva difference!

    Naturally I simply cleared the 0% balance.

    I know everyone’s circumstances are different but the only change I made was to the credit card balance on completion.
    • kingstreet
    • By kingstreet 10th May 18, 4:33 PM
    • 33,678 Posts
    • 18,263 Thanks
    kingstreet
    • #6
    • 10th May 18, 4:33 PM
    • #6
    • 10th May 18, 4:33 PM
    To give an example. My current lender, with a £2000 credit card balance max prepared to lend was £188,000...without that credit card it was £231,000...that’s a helluva difference!

    Naturally I simply cleared the 0% balance.

    I know everyone’s circumstances are different but the only change I made was to the credit card balance on completion.
    Originally posted by liviboy
    ... and the case I currently have on the Halifax affordability calculator when a £2,000 balance was added to it made absolutely no difference to borrowing power.

    Demonstrating as you say that everyone's circumstances vary as do lender affordability calculations.

    You may have found a different lender taking a different approach.
    I am a mortgage broker. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. Please do not send PMs asking for one-to-one-advice, or representation.
    • ACG
    • By ACG 10th May 18, 5:32 PM
    • 17,147 Posts
    • 9,045 Thanks
    ACG
    • #7
    • 10th May 18, 5:32 PM
    • #7
    • 10th May 18, 5:32 PM
    I find it hard to believe a lender would alter their lending amount by £40,000 on a £2,000 balance.

    Are you sure you filled out the affordability calculator correctly?
    I am a Mortgage Adviser
    You should note that this site doesn't check my status as a mortgage adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
    • Thrugelmir
    • By Thrugelmir 10th May 18, 6:22 PM
    • 59,211 Posts
    • 52,601 Thanks
    Thrugelmir
    • #8
    • 10th May 18, 6:22 PM
    • #8
    • 10th May 18, 6:22 PM

    A lady who had worked at the FCA on tougher mortgage lending rules was denied a mortgage because she didn't have two years of income as a self-employed consultant.
    Originally posted by SouthLondonUser
    That's a commercial decision for her existing lender. The fact she previously worked at the FCA has no relevance.
    Financial disasters happen when the last person who can remember what went wrong last time has left the building.
    • csgohan4
    • By csgohan4 10th May 18, 7:31 PM
    • 4,631 Posts
    • 2,897 Thanks
    csgohan4
    • #9
    • 10th May 18, 7:31 PM
    • #9
    • 10th May 18, 7:31 PM
    That's a commercial decision for her existing lender. The fact she previously worked at the FCA has no relevance.
    Originally posted by Thrugelmir
    But got to admit the irony there though
    "It is prudent when shopping for something important, not to limit yourself to Pound land/Estate Agents"
    • amnblog
    • By amnblog 10th May 18, 9:12 PM
    • 10,632 Posts
    • 4,206 Thanks
    amnblog
    Don!!!8217;t miss the key point of the article that her Broker found her a solution.
    I am a Mortgage Broker

    You should note that this site doesn't check my status as a Mortgage Broker, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
    • mcpitman
    • By mcpitman 11th May 18, 10:46 AM
    • 543 Posts
    • 370 Thanks
    mcpitman
    Good! As she states in the article, it's not the rules themselves that caused the issue but rather the lenders' interpretation of the rules...and who can blame them for erring on the side of caution given there were threats of big fines for "irresponsible lending".

    This is what happens when regulators interfere in ways which affect the normal customer unjustifiably...

    "stress testing" borrowers to interest rates of 10-15% when the current base rate is 0.5%...and not taking into account that LTV will most likely reduce as mortgage payments are made...

    Removing entirely from the calculation a credit card balance of a couple of thousand pounds when it would be cleared within 12 months...yet that £2,000 is removed, in its entirety, from a customer's income for affordability and lending calculations rather than as a one-off sum... so that £2,000 is multiplied by 25 or 30 years....

    MMR rules have made mortgages much harder for normal working folk who can otherwise afford current mortgage payments or indeed rent payments without any issue...

    It's annoying and perhaps getting a taste of her own medicine will make her reflect when she is "consulting"...
    Originally posted by liviboy

    Most of the above needs ignoring due to it being complete twaddle.
    Life isn't about the number of breaths we take, but the moments that take our breath away. Like choking....
    • SouthLondonUser
    • By SouthLondonUser 11th May 18, 10:55 AM
    • 537 Posts
    • 78 Thanks
    SouthLondonUser
    Yes, of course it was a commercial decision by the lender.

    Yes, of course the fact that she had worked at the FCA has no relevance.

    Any more obvious points people feel compelled to stress?

    The facile irony, in case it was missed, is that the rules she had a role in designing contributed to a general climate whereby many lenders have become more cautious, in some cases possibly even more cautious than the regulators would have deemed necessary (but, yes, before any one points it out, of course it's a commercial decision each lender must be free to take etc etc etc.). This somewhat contributed to her being denied a mortgage. Would the same have happened without "her" new rules? No one can know for sure. The fact that she did manage to get a mortgage through another broker proves the new rules do not, by themselves, prevent lending to the self-employed.
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