Will you be able to secure a new mortgage deal?
New lending criteria introduced in response to the Mortgage Market Review (MMR) last year were widely welcomed, but could the new measures - which aim to cut down on irresponsible lending - actually be working against frugal home owners who have proven affordability?
According to the BBC, up to 4 million home owners could struggle to secure a new mortgage when their existing deal comes to an end. Home owners with children, those working in sales, the self-employed and those on an interest-only mortgage could all find it difficult to secure a mortgage due to the new measures.
Previously, childcare costs were given little consideration when assessing mortgage affordability, but stricter guidelines mean that childcare is now a big consideration for mortgage lenders. Most lenders will apply average costs when calculating affordability, so you may find that you and the mortgage lender have quite different ideas about what you can afford, especially if you pay less than the average cost they use for their calculations.
Other new guidelines that have had an impact include many lenders' refusal to include more than 50% of your annual bonuses or commission when considering how much they're prepared to lend you, and recommended age restrictions which have had a significant impact on borrowers over the age of 40.
Homeowners who have never struggled to afford their mortgage repayments are suddenly finding that they're being turned down for a mortgage f the same value, with the same monthly repayments, even though their personal circumstances remain unchanged.
If you're coming to the end of your fixed rate mortgage and are concerned that you may struggle to secure a new deal, it's worth getting in contact with an independent financial advisor (IFA). An IFA will be able to talk to you about your personal circumstances and finances, and look at affordability criteria to advise you of the mortgage that would best suit your situation. They'll also be able to advise which mortgage lenders use manual underwriting and are therefore more likely to consider your individual cirumstances when assessing affordability.
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