How Will The Mortgage Market Review Impact Shared Ownership Mortgages
The mortgage industry has been subject to substantive change for many years, none more so than the recent introduction of the Mortgage Market Review. As far back as 2009 a Discussion Paper was put forward on the subject, resulting in a set of rules being issued in October 2012 followed by its introduction in April this year.
We’ve asked one of our panel mortgage advisors, Clark Marshall, to give us their view on what the MMR has meant for them and their customers.
The main aim of the Mortgage Market Review
The main aim of the MMR was to provide a sustainable market place that worked better for consumers.
The media have made much of scenarios that suggest that lenders are looking at all clients in great detail and penalising them for any outgoings that are evident, stories of underwriters delving as deep as to find which Supermarket you shop at, which restaurants you eat at and where you go on holiday have hit the tabloids and the internet. If we turn the clock back pre the initial MMR discussion paper lenders were normally working out the amount they would lend based on income multiples, typically lending between 4 and 5 times household income, some lenders would also allow applicants to self certify their income without requiring any proof. In hindsight the writing was on the wall for problems in the future when you have a scenario that would allow a lender to lend without evidence of income the same amount to a single person household as they would to a household containing two adults and 3 children. The committed expenditure of the family unit far outweighing that of a single person.
The impact of MMR so far
Having been rolled out at the end of April we have now had time for the market to settle down and many of the initial teething problems have now been resolved. From our own experience many of the issues were as a result of lenders having to introduce new technology to meet the guidelines, this technology was not always up to the job in hand and in many cases has led to frustration and delays.
From an “Affordable Housing” perspective many of the changes that were introduced had already been introduced in this sector and have been part of the normal process for qualifying and applying for such products and funding. Having to supply 3 months payslips, P60, bank statements, proof of address and proof of deposit have long been requirements in this sector. It’s fair to say that lenders are now asking advisers to look at these documents in more detail and questioning certain items such as Pay Day Loans and Gambling transactions. More emphasis has been put on finding out the true costs of childcare and factoring these into affordability calculations.
Is it good or bad news for Shared Ownership mortgages?
For those clients who can provide all of the documentation and past addresses, feature on the voters roll and have maintained any credit agreements satisfactorily access to mortgage funding should still be available. However for those without documentation, not registered on the electoral register, with gambling evident and the reliance on payday loans the dream of home ownership may be more difficult.
We believe it is more important than ever that clients speak with a specialist adviser at an early stage to enable them to assess the applicant’s situation and give guidance as to what measures can be taken to give the greatest chance of a successful application once a property has been found
Your home may be repossessed if you do not keep up repayments on your mortgage.