Mortgage News
Incoming regulation will let down mortgage ‘misfits’
Stricter lending criteria could bar the self-employed and those earning less than £25,000 a year from the mortgage market after the regulatory rule changes on 26 April, said a mutual lender.
Small business owner and those with unusual income types like pensions, equity in a business or property could fail automated lending assessments, said Paul Winter CEO Ipswich Building Society.
Winter said: “It is entirely appropriate that the FCA wishes to introduce regulation to ensure the lending excesses of pre-2008 are not repeated and that irresponsible lending is firmly tackled.
“However, I am concerned that people on average incomes may now find it harder to obtain a mortgage and I believe this may prove to be an unintended consequence of the methods used to implement affordability requirements.”
In an example, Winter said a family of two adults and two children wishing to purchase a property for £125,000, with a household income of £30,000 and with a 10% deposit, would not meet a computer’s affordability model.
Winter said: “The Government needs to address housing supply issues rather than potentially limiting those on average incomes from obtaining a mortgage. Many aspirational home owners are facing a double lock: unavailable lending and a lack of homes to choose from.”
Are your clients ready for the first Making Tax Digital reporting deadline?
Sponsored by BM Solutions
Ipswich Building Society has also launched an affordability calculator.