The Mortgage Market Review (MMR) was set into effect last Saturday in an effort to make borrowing more responsible and lending more stable.  The MMR requires borrowers to show they can indeed afford, both now and later when interest rates increase, the loan they are seeking.  This will require the sharing of the borrower’s income as well as their debt and spending habits to determine their “net” income and ability to afford a mortgage or remortgage.

Borrowers will have to share personal details of their life expenditures such as entertainment activities, hobbies, childcare costs and food costs to expose their ability to borrow at a level they can afford.

Many homeowners and future homebuyers are not aware of the new changes, while others may be aware of them but not fully understand the extent of the process or what is required of them to gain approval.

Experian conducted a survey of 1,500 people and found that 43% thought the MMR was going to allow borrowers to apply with smaller deposits.  There may have been a confusion of the MMR with the Help to Buy scheme which does allow home buyers to qualify for a new purchase mortgage with a lower deposit level.

There were many that were better informed, at a level of 44%, atydx understanding the MMR would require lenders to be careful in approving loans for those that could afford a mortgage or remortgage both now and when interest rates increase.

Peter Turner, managing director of Experian Consumer Services, remarked on the MMR, saying, “Although none of us have the luxury of a crystal ball to see into the future, understanding how much we can really afford to borrow, and crucially, repay, even if our circumstances change, is so important for any credit application.

“Time spent preparing your finances now will pay dividends in the future. We’d advise potential homebuyers to look at their financial situation as soon as they make the decision to look for a home, and not just before they apply for a mortgage.

“This will give you the chance to make any improvements necessary and get accepted - and at the best rates, too. 

“Simple steps like increasing your monthly credit card repayments, ensuring you’re registered on the Electoral Roll and not taking on additional borrowing can make a real difference to how lenders see your ability to afford and manage a mortgage. But it does take time to build a clear, consistent track record of positive money management.”