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MMR affordability rules locking borrowers out of market – IMLA

  • 21/11/2016
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MMR affordability rules locking borrowers out of market – IMLA
Mortgage borrowers are frustrated by difficulties they face in obtaining enough finance to purchase a home, as tough affordability regulations lock out the self-employed and less affluent, research finds.

The study, carried out by the Intermediary Mortgage Lenders Association (IMLA) over August and September, asked lenders and brokers to give their views on how consumers felt about the mortgage market.

Some 70% of lenders and 67% of brokers said restricted access to the level of mortgage credit consumers want or feel they can afford was cited as the top frustration. This was followed by 67% of lenders which said too much paperwork was an irritation among applicants.

Interest-only mortgages were found to be the most difficult to source, with 51% of intermediaries reporting they were unable to secure this type of loan for a borrower in the last six months. Marginal groups of borrowers, such as applicants with adverse credit and the self-employed, also struggled to obtain their desired level of mortgage credit, with 49% and 46% of intermediaries, respectively, reporting they were unable to find finance for these applicants.

Peter Williams (pictured), executive director for IMLA, said: “Following the financial crisis, policymakers and regulators have rightly sought to increase the stability of the mortgage market through several different pieces of regulation. While these polices have reduced risk, they have also reduced non-standard borrowers’ ability to access the mortgage finance needed to get on the property ladder.”

IMLA acknowledged the increased stability of the mortgage market since the introduction of the Mortgage Market Review rules but said it had been achieved at the expense of some customers. Borrowers with secure jobs, strong credit histories and sizeable deposits have all fared well under tighter market regulation but those falling outside these categories, IMLA said, faced a less accommodating market.

The findings of IMLA’s latest report, Is the mortgage market working for consumers, echos research carried out by automated valuation provider Hometrack. Speaking to an audience of mortgage intermediaries at The Mortgage and Protection Event in Newcastle earlier this month, Richard Donnell, research and insight director, said regulation had turned the first-time buyer market into an 85% loan-to-value playing field.

The trade body wants the FCA’s impending competition review to recognise the role that regulation plays in limiting consumers’ access to mortgage finance. It also calls for an independent assessment of mortgage regulation to be carried out to ensure the interests of excluded borrowers are property weighed against the benefits of a more constrained mortgage market.

“While it is hugely important that market stability is supported, it is questionable whether such a tight regulatory approach is compatible with policymakers’ goal of increasing popular homeownership,” said Williams.


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