The Mortgage Market Review (or MMR) was implemented in April as a way to make sure borrowers could really afford their mortgage – both now and when rates rise. There was much speculation about its potential impact with many thinking (or perhaps hoping) that it'd cool the housing market as it settled in, but has it really had that much of an effect?
According to figures from the Council of Mortgage Lenders (CML), it's had an impact on some sectors – but perhaps not as much, or as wide ranging, as was expected. In total, the number of house purchase mortgages advanced to borrowers reached 57,900 in May, up 9% compared to April, and the value of these loans totalled £9.6bn, another month-on-month rise of 9%.
Breaking the figures down we can see that this strong growth was mirrored in both first-time buyers and home movers, and in fact only remortgaging witnessed a drop in activity, falling by 18% month-on-month in both number and value (21,600 remortgage loans were advanced, totalling £3.3bn).
Paul Smee, of the CML, commented on the findings: "With May lending figures, we get our first glimpse at the effect the Mortgage Market Review has had on lending trends and, at least so far, the impact appears subtle, rather than dramatic. First-time buyers and home movers continue to be key drivers in market growth and their activity does not seem to have been noticeably disrupted."
Overall, the figures would suggest that tighter regulation hasn't had as much of a negative impact as might have been expected, and as long as you prepare sufficiently (scrutinise your budget, get a suitable deposit, have plans in place to afford a rate rise etc.) it shouldn't impact you too much either. It's only those seeking to remortgage, who could well be waiting to see when base rate will rise before proceeding, that are falling back from the market, and Brian Murphy of the Mortgage Advice Bureau thinks it could well be the "calm before the storm".
"An increasing number of homeowners are ready to explode out of the blocks when they judge the time is right to move to a better deal," he explained, adding that "the 0.5% base rate is clearly on borrowed time and mortgage holders will be keen to act before the interest rate pendulum swings out of their favour."
Despite the lack of immediate impact in the purchase sector, what the MMR has done, and will hopefully continue to do, is put affordability at the top of the agenda. This is even more imperative considering the state of the market at the moment – the ongoing speculation over a change to base rate has had the expected effect of pushing up mortgage rates accordingly.
Figures from Moneyfacts show just how much of a difference it's made. In the last month alone the average two-year fixed mortgage rate has gone from 3.46% to 3.51% – marking the seventh increase in the last year and the fifth in the previous six months alone – and there's no indication of it going anywhere but up.
So, it looks like the run of record-low mortgage rates is well and truly over. That means borrowers, particularly first-time buyers, need to be even more careful that they find the product that's right for them – and luckily there's still a lot to choose from.
Not only has Moneyfacts research identified a clear surge in the amount of 95% loan-to-value mortgages available in the last few months (the number has more than tripled since the launch of the Help to Buy phase 2 in October), but additional figures from e.surv have revealed that high-LTV lending is at a post-crisis high, with June seeing 10,898 loans advanced to borrowers with a deposit of 15% or less.
There are concerns, however, that high-LTV lending could start to tail off in the wake of new regulations, with the Government loan-to-income cap of 4.5 and additional stress tests further tightening restrictions that were brought in with the MMR. Nonetheless, if you're budgeting correctly and have got the finance in place to handle repayments now and when they inevitably have to increase, you can still take advantage of the mortgages available.
So, start looking for the best deal (and ideally fix to it) to protect your finances from any impending rate rise, and as long as you've got everything organised you can be confident that the MMR shouldn't have too much of an impact on your mortgage-hunting ability.
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