Mortgage Rejections Set To Increase In UK As New Rules Take Effect

By Editorial 06 May, 2014

Securing a UK mortgage has become more difficult as a result of the mortgage market review, with a new set of regulations being implemented by the Financial Conduct Authority.

The new rules introduced under the Mortgage Market Review, most of which came into effect on April 26, 2014, are intended to increase protection for borrowers. Drawn up in 2009, the changes make lenders responsible for conducting thorough affordability checks. Borrowers will need to provide more detailed information on their spending habits when applying for a loan, and the application process will take longer.

Martin Wheatley, chief executive of the FCA, said: "Since the crisis, lenders have been taking a far more sensible approach to mortgage lending, and the MMR is designed to ensure that this common-sense approach continues. We do not want to see mortgage lending return to the practices of the past where people were taking out mortgages they simply couldn't afford."

The more stringent affordability checks, along with a "stress test" to determine whether an applicant can repay the loan if interest rates increase over a five-year period, mean that there is expected to be an increase in the number of applications being rejected.

Linda Woodall, FCA director of mortgage and consumer lending, sought to allay fears that the MMR would cause a drop in lending: "From what we are seeing, mortgage lending is continuing to increase. I think the MMR will take the froth off the market but I don't think the MMR will be the cause of a fall in mortgage lending."

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