The Financial Conduct Authority (FCA) who regulate residential mortgages in the UK have been reviewing the market over the last few years to make sure that it works well for consumers. The process was called the Mortgage Market Review (MMR) and is due to be implemented on 26th April 2014.Conveyancing Associate Helen Jones says, “The FCA have made very positive changes to ensure that borrowers are offered a mortgage they can afford, and the new rules aim to ensure that poor practices do not return.” In the lead up to the financial crisis there were some risky lending practices and the assumption that house prices would continue to rise contributed to many borrowers taking out a home loan that they ultimately could not afford to repay. It is intended that the new regulations will promote responsible lending and stability to the financial system.
The changes:
- Lenders will now be responsible for checking whether a borrower will be able to afford expected interest rate rises in the coming years
- For interest-only mortgages lenders must check that borrowers have a plan in place to repay the capital at the end of the term
- Applicants will have to demonstrate they can afford the mortgage at an increased level under new stress testing criteria i.e. interest rate rises.
The FCA has said that they will not begin testing mortgage lenders MMR processes until later in the year. This will allow for a ‘period of adjustment’ while lenders and brokers get used to the new regime.
We have offices in the Christchurch, New Milton and the New Forest. Our Conveyancing team also cover Bournemouth and Poole. For a free initial chat, please call 01202 499255 and Helen or a member of the team will be happy to discuss any questions that you may have.
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