1) Is it good news, bad news, or will it make almost no difference?
It’s excellent news in terms of further improving professionalism, avoiding lending that could otherwise result in consumer detriment, and generally rebuilding faith in the financial sector.
2) What impact will it have on buyers without large deposits or equity? Will they be impacted more than those with plenty of equity?
No, if anything they will be impacted less than they have been in the past because MMR sees the removal of the old fast-tracking system whereby clients with larger deposits were subject to far less stringent income and affordability assessments than their counterparts with smaller deposits.
MMR puts clients on a level playing field, irrespective of their income or their level of deposit, because their income will be assessed in exactly the same way.
3) Will it slow down or speed up mortgage lending? If it slows down the process what impact will this have on sales?
More stringent checks by the lenders are going to result in longer lead times to offers, not least because there’s going to be a lack of suitably qualified personnel within many of the UK’s largest mortgage providers and this could lead to capacity constraints certainly within the first six months.
This will not necessarily lead to a reduction in sales however, the market will just adjust to that new way of working. Anyone purchasing a property post MMR is going to be subject to those same checks if they were purchasing a property with a mortgage so it affects borrowers as a whole rather than one group so the market will have to cope with it.
If a mortgage offer is typically coming out in 3-4 weeks now, the new norm will perhaps be closer to 5-6 weeks post-MMR.
4) Will it stop buyers on average salaries being able to borrow enough to buy in the larger cities like London?
There are serious challenges for buyers in London in particular on average salaries, but these are outside of any particular challenges posed by MMR.
It could also be said that it will stop borrowers overstretching themselves because the lender will have to assess that borrower’s ability to repay their mortgage both now and in the future taking into account any potential raises in interest rates.
5) Buyers will face more in-depth questioning about their financial affairs before being granted a mortgage – who will this have this have the biggest effect on?
It affects every borrower, there is no one particular group of borrower that will be more affected. Lenders aren’t necessarily looking to reinvent the wheel in the way that they calculate a client’s income or the documentation that they require to prove a client’s income. The big difference with MMR is that affordability is properly assessed, i.e. an income multiple isn’t used as the main means of assessing a client’s affordability.
We don’t see broad based criteria being changed but there will certainly be lenders that are drilling down into individual circumstances in more detail, for instance those with high childcare costs, those with maintenance payments or private school fees, all of these costs will be looked at in far more detail than in previous years.
Lenders will struggle to transact the levels of business that they have done through their branches. But it’s widely been accepted that MMR will be broadly positive for the broker community because we have the qualifications and are already staffed up to cope with the post-MMR requirement that advice is given on nearly all mortgage transactions; whereas lenders will struggle to find enough qualified individuals in branches.
6) Is it ultimately a good and necessary step or will it cause more problems than it solves?
It’s a hugely positive step as it’s the first time that branch based staff, lender’s telephone staff and the intermediary community have been placed on a level playing field.
