What do the new mortgage regulations mean for you?
A mortgage is for the majority of people the single biggest finical commitment that they will make. With this in mind any changes to the mortgage system are hugely important to keep abreast of. The latest overall in mortgage regulation has come into force. The new rules are centered on making who can secure a home loan stricter.
Therefore what are these new changes and how do they affect you? Therefore lenders will not only assess applicant’s income but their outcome also. This is very important aspect to consider when seeking a mortgage because it means that the range of question asked when seeking a mortgage will widen. For example the questions can take into account all sorts of regular outgoings, haircuts, subscriptions, holidays, travel, gambling and childcare. This means that when considering a mortgage it is very important to establish a clear household budget. Therefore organising payslips and bank statements so they are ready to be sent to the lender to speed up the process. This also means cleaning up the household budget, for example cancelling unused and unnecessary outgoings such as a subscription to a club or gym that you no longer use.
One of the reasons for the changes is that the Bank rate is currently at a record low, which means that mortgage interest rates are at a low. Therefore a new aspect of the regulations will be the introduction of ‘stress testing’. These test are designed to access whether an applicant could cope with a rise in interest rates. For instance a lender may be offering a mortgage with interest of 4% but that rate will most likely rise to around 7%, therefore the lender needs to access whether the applicant could make regular payments at that percent. If the lender judges that the applicant cannot afford the rise then the lender will reject the application.
Naturally because of these more in depth checks the process is becoming a more time consuming task, which means that people seeking a mortgage must consider this new aspect. Furthermore the new regulations mean that around 50% of applicants will be obliged to see a qualified mortgage advisor, which means more meetings and a longer sales procedure. The important thing to take from this is to be prepared from a long process and not expect a quick purchase.
As is the case with all new government regulations it is very worthwhile pursuit researching and figuring out what the changes mean to you, because to get the best finical return it is best to know how the regulation works. In regards to mortgages the importance is even more impetrative because as stated it is the biggest finical burden one is likely to take on and bearing in the mind the rising house prices, therefore seeking an in depth knowledge is the best way to guarantee a safe and finically viable mortgage.
Learn more about Mortgage Regulations contact Mortgage Simplicity.