New rules for mortgage lending

Mortgage lenders will come under increased scrutiny with new, stricter rules.

New rules covering mortgage lending take effect this weekend. The Mortgage Market Review (MMR) is designed to ensure that home buyers only take on debt that they can afford to repay.

Lenders will have to stress test' all loans to ensure they can survive an increase in interest rates. They will also be expected to scrutinise household finances much more closely, which could include looking at individual items of expenditure. Only staff trained as full mortgage advisors will be allowed to sell mortgages.

What the commentators said

For instance, "anyone taking out a loan with Woolwich, the lending arm of Barclays, will have to give details of any plans they have for their property, such as refurbishments".

This is not just an empty threat: "Barclays said it will change the terms of someone's mortgage if it discovers it was not informed of something that might affect the borrower's ability to repay".

"We have the unusual spectacle of a state agency intervening in domestic space to tell hard-pressed first-time buyers and families how they should spend what little disposable income they have," said Hal Austin in FT Advisor. Yet, "there would be a national outcry if the state, through any of its agencies, tried to tell households what make of car they could afford".

So, what is the rationale for state intervention in mortgages? "Just because someone is poor, low-paid, or even a single parent, does not mean that someday they too would not like to have a place they can call their own home."

But this is a "common sense approach", as a spokesman for the Financial Conduct Authority told The Independent, to guard against "the bad practices in the run up to the financial crisis... Under our new rules, anyone that can afford a mortgage will be able to get a mortgage".

Recommended

House prices: from boom to even bigger boom
House prices

House prices: from boom to even bigger boom

UK house prices have risen to new to record highs, says Nicole Garcia Merida. Demand continues to outpace supply, but continued low interest rates, th…
9 Apr 2021
The global property bubble
Property

The global property bubble

Forget equities, the real post-pandemic action has been in property. And not just in the UK – it is a worldwide phenomenon.
9 Apr 2021
Properties for sale with roof terraces
Houses for sale

Properties for sale with roof terraces

From a split-level apartment in a converted Victorian rice mill in Rotherhithe, London, to a Grade I-listed Georgian townhouse with far-reaching views…
9 Apr 2021
Properties for sale for around £400,000
Houses for sale

Properties for sale for around £400,000

From a converted church in Banffshire with views towards the Cairngorms National Park, to a period property in the Georgian market town of Beverley, e…
2 Apr 2021

Most Popular

The bitcoin bubble will burst: here’s how to play it
Bitcoin

The bitcoin bubble will burst: here’s how to play it

The cryptocurrency’s price has soared far beyond its fundamentals, says Matthew Partridge. Here, he looks at how to short bitcoin.
12 Apr 2021
Four investment trusts for income investors to buy now
Investment trusts

Four investment trusts for income investors to buy now

Some high-yielding listed lending funds have come through the crisis with flying colours. David Stevenson picks four of the best.
12 Apr 2021
Central banks are rushing to build digital currencies. What are they, and what do they mean for you?
Bitcoin

Central banks are rushing to build digital currencies. What are they, and what do they mean for you?

As bitcoin continues to soar in value, many of the world’s central banks are looking to emulate it by issuing their own digital currencies. But centra…
8 Apr 2021