The introduction of the Mortgage Market Review (MMR) last year heralded a sea of changes to the way in which borrowers' affordability is assessed for buying property. However, it seems as though many borrowers are still confused about the effects of the new regulations, meaning many are unable to fulfil their home-owning dreams.
According to new research by Experian, almost half (45%) of those questioned who planned to buy a property since the advent of the MMR have failed. A quarter of these blame the new regulations, while another third (37%) report that the changes have made them feel less in control of securing a mortgage.
Ongoing confusion around the rules and what they mean appear to be at the root of the problem, as many respondents revealed that they misunderstood the fundamentals of the new regulations.
The research found that a massive 62% of those questioned were unaware that lenders may now require larger deposits, while an even more worrying 23% believed that they could now apply with smaller deposits than before. Another 37% failed to recognise that lenders would now be heavily focused on whether repayments could be met. The survey also found that 15% of respondents believe that lending criteria has been relaxed since the introduction of the MMR.
Bearing these findings in mind, it is perhaps not surprising that so many would-be borrowers have fallen at the mortgage hurdle. This becomes even more understandable when the preparations of failed borrowers are examined.
Experian's survey revealed that many of the borrowers who had failed to secure a mortgage were bypassing the basics of mortgage application preparation. Indeed, almost half (46%) admitted that they have never checked their credit report, which means that they are unaware of how a lender could view their ability to make repayments.
The research also identified failings in terms of budgeting. When questioned, 13% of failed mortgage respondents said that they had no idea how much money was left over in their account at the end of the month, while another 18% didn't know what monthly repayments they could afford.
Worryingly, some respondents remain unaware of why they were rejected for a mortgage. Of those who were unsuccessful, 11% said that they did not know why they were unable to secure a mortgage or that they hadn't asked their lender for the reason. This means that future applications could also be turned down.
If you've been thinking that the time is ripe to get on the ladder, or perhaps you have been rejected for a mortgage, it's time to get your preparations in order.
First things first, check your credit report. This will give you an idea of what sort of prospect you will represent to a lender. Check that your details are all correct and that there aren't any old credit accounts. Next, take a long, hard look at your outgoings. You need to show that you can stay in the black and, preferably, put some extra money aside. Try to cut down on non-essentials and divert extra cash into a savings account. This way, you can also build up a nice pot to cover all the expenses of buying a house!
Finally, check out our first-time buyer best buys and mortgage calculator to find a mortgage that suits you. This way, you will be able to work out what sort of deposit you need and how much you can afford in monthly repayments. Once this is done, you can think about putting in an application and, if you have prepared carefully, you could soon be on your way to buying that dream house!
Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
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