While one can laugh at the level of scrutiny into the number of steak dinners a borrower has each month, dry-cleaning bills or betting habits there is a serious issue to be addressed here and it’s the end decision lenders make.
The MMR rules were designed to ensure lenders do not lend to those who can’t afford their mortgage payments, either at the current product rate or a future ‘revert rate’. I would argue they were not designed to destroy the hopes of anyone looking for mortgage finance.
While I don’t expect ‘mass declines’ it looks likely we will see a serious fall in lending levels in the coming months and, those potential borrowers who may well have thought they would have little difficulty securing mortgage finance are going to be left deeply unsatisfied.
There has been much talk about ‘mortgage prisoners’ over the past few years with solutions put forward to help those in this predicament however, to my mind, if we have to deal with overly forensic lenders in the future then we’re simply going to add to the numbers of prisoners and those who are unable to get on the housing ladder.
All this at a time when it appeared the market was slowly dragging itself up off its knees and there was finally a degree of optimism about the future.
We have seen a slow shift in the marketplace over the past month with rates on the rise and criteria tightened up. Add to this the fact the whole process is much lengthier and we can see the start of a sizeable blockage.
It is of course very early days but I suspect this impasse could last at least a few months, probably more, principally because the lenders want time to ensure they are acting compliantly and their systems are working. Whether we feel the white heat of the market in the second half of the year is another question.
My feeling is the impact of MMR, certainly on lending levels, is going to be felt for the duration of the year and therefore we should be preparing our clients for a rather different environment than the one we were all basking in just a few months ago.
Richard Adams is managing director of Stonebridge Group
