Applying for a mortgage is rarely a straightforward process. In April 2014, the process was made even tougher with the introduction of the Mortgage Market Review (MMR), new rules on mortgage affordability.
A quarter claim that the MMR has impacted their ability to buy a property, while a further third (37%) report that the changes have made them feel less in control of securing a mortgage.
In a study conducted by Experian in April 2014, just 44% of those surveyed were aware that the MMR would mean that lenders would be more careful about ensuring mortgage applicants could afford their repayments. And one year on, it appears that this is continuing to affect many. Of 1,500 respondents who bought or planned to buy a property in the last year:
- 62% were not aware that lenders may require bigger deposits (worryingly, 23% believe they could apply for mortgages with smaller deposits than before);
- 37% didn’t recognise that lenders would now be more careful on whether they could afford repayments;
- 15% mistakenly believe that lenders have now relaxed their lending criteria as a result of the MMR.
Guy Shone, at ExplaintheMarket, said: ”We’re now one year on from the MMR and it seems many people remain stuck in a bit of a muddle. More needs to be done in 2016 to encourage personal financial planning and properly support aspiring home buyers, so that all buyers fully understand the rules of the game – and stand the best chance of securing a property they can afford.”
Navigating the mortgage market can be tricky for buyers, so Experian have launched a useful step-by-step Mortgage Application Guide to help give people the best chance of being approved for the mortgage they can afford at the best rate, which could save a significant amount of money in the long run.
And we’ve got five tips that could help you prepare for a mortgage application after the Mortgage Market Review:
- Know what you have to spend: Think carefully about what kind of deposit you can put together. The size of your deposit will often dictate how much you face in terms of interest rates and lender fees. Lenders are also keen to know whether you’ll you be able to afford it should interest rates go up, or if your circumstances change.
- Do your research: Use mortgage calculators and comparison websites or speak to a mortgage adviser to find out where the best deals are and what type of mortgage will suit your circumstances. Work out what you can afford to borrow and repay, both now and if rates rise by 1%, 2% or more.
- Look at how much you’re spending: Prepare now by building good habits like increasing the amount you save, clearing overdrafts and cutting back on discretionary spending to ensure you close out the month with even a small surplus.
- Check your credit report: As soon as you make the decision to buy, check your credit report with all three credit reference agencies. Ensure everything is accurate and up to date and reflects your current circumstances. Check the exact way your address and other personal details appear on your credit report. Small inaccuracies could see your application turned down, so don’t overlook the details. If you spot anything you believe to be inaccurate, contact the relevant credit reference agency and ask them to investigate the entry with the lender.
- Room for improvement: If your credit report has room for improvement, take steps now to get it into shape before making your mortgage application. There are a number of steps you can take, including ensuring you’re registered on the Electoral Roll; paying off more than the minimum repayments on your accounts each month and making sure never to miss a repayment.