Many of us will be more familiar with MMR when referring to a vaccine but anyone in the mortgage industry knows it only as the Mortgage Market Review. This has been years in the making and will lay down new rules around the sale of mortgages in a bid to prevent a return to the lax lending practices at the peak of the market.
As a result the MMR will provide a framework for mortgage lenders and advisers when it takes effect on 26th April. But what will it mean for borrowers?
Much of the focus of MMR is on lenders showing that a mortgage will be affordable for the borrower, not only now but also in the future. Although self certification died out years ago the new rules ensure it won’t return and all income must be proven.
Affordability models have been used by lenders for some time rather than a straight forward income multiple, but borrowers should expect to be asked more detail around their monthly budgeting and expenditure. Having a good idea of how much the household spends on food, utilities, travel and childcare will be required when applying for a mortgage.
Lenders will also apply a stress test to make sure that the mortgage will be affordable as rates change as well as on day one. That will see lenders apply assumptions based on how rates are expected to move over the next 5 years.
Although many of these approaches are already part and parcel of the mortgage market there will be tweaks and changes to come. It may even see lenders step off the gas as they look to bed in new systems, so mortgage rates may even edge up slightly as a result.
What it does do is underline the need for advice. Tailoring the right mortgage deal to the right borrower is vital. It is now about much more than simply finding the lowest rate, and ensuring that the borrower is likely to meet the lender’s criteria will help save time, money and heartache.
Using The Guild’s fee-free mortgage advice service will help borrowers find a solution tailored to their individual needs, as well as reduce hassle by providing assistance with the mortgage process from start to finish.
Contact Charles Eden and we can put you in touch with an adviser – 020 8663 1964