Mortgage woes
Is it harder to get a mortgage nowadays? Yes it is but why.
On average, the Bank of England reports that UK has a higher level of personal debt than nearly all developed countries.
So what? – The regulators believe that the risk of a negative equity hole in housing threatens the financial stability of the UK. This hole could be created by a correction in house prices and UK borrowers potential inability to pay, because of an increasing cost of living or higher interest rates.
Therefore, the Financial Services Authority conducted a mortgage market review (MMR) that made changes to the regulations for mortgage lending. The changes came into effect April 14.
The critical factors taken into account were the recession induced sustained low interest rates and the self certified affordability rules that were fuelling a house price boom. These in turn increased default risks and long-term indebtedness in households.
In addition, the increase in private buy-to-let properties could negatively impact house pricing if profit margins were eroded in a phase of low wage increases and rising interest rates and costs (insurance, council tax and maintenance for example). Also, for those able to get a mortgage they were becoming cheaper than renting and so threatened the rental stability. Reduced margins could flood the market with housing and lead to rapidly increasing negative equity in the owner market.
This could transfer greater capital risks to a wider owner occupier base, again fuelling default risks and long-term indebtedness. In some ways, action was required to protect us from overextending ourselves financially.
The result is mortgage borrowers now have to satisfy a much more stringent set of affordability rules including assessment of borrowers ability to maintain their basic living needs when interest rates go up or their wages and employment change during the life of the mortgage. And, for example, unless you have a clear solution for repayment of the capital, interest only mortgages are prohibited.
A potentially unintended consequence of the new rules has been to make mortgage borrowing prohibitively difficult for older customers, both first time buyers and aspiring home movers.
Why does leaving the services after 40 or the pensionable 22/44 break point create a problem?
Well new job, new career, kids-at-school and less than 25 yrs before age 65. What? 25 yr standard mortgages normally stop at 65 and shorter terms (for over 40s) mean higher repayments set aside the proof of income issues of changing jobs or being self-employed.
For those retiring at 55 yrs it becomes even more complicated if you want a loan for a house or releasing equity. Majority of over-55s want tailor-made retirement lending products What Mortgage – 07 September 2015
You (at least the military, doctors, GP practice managers, nurses and police) know you’ll probably change jobs and/or move during the mortgage period so you can plan for it.
We understand the fact that your position, housing needs and family circumstances may change throughout the deal. With our adaptable services, we will help tailor affordable mortgages that are best for you! We want to work with you as individuals in order to say yes whenever we can, and within the new rules.