New rules following the Mortgage Market Review (MMR), implemented last month, have put affordability at the top of the agenda. Thanks to tighter application criteria it was expected that the market might be somewhat subdued, and while initial figures indicate that it has had an impact to some extent, it's not necessarily in the sector expected.
It had been widely thought that it would be first-time buyers that would feel the effects the most, however younger borrowers, far from being put off, seem to be undeterred by these stricter affordability rules. In fact, figures from the Mortgage Advice Bureau's latest National Mortgage Index state that the age of borrowers has actually reduced – in April, the average age of someone seeking a mortgage was 36.9, the first time it's fallen below 37 since September 2010.
Given that younger borrowers are typically first-time buyers, we can surmise that prospective homeowners haven't been deterred by the new rules and are still able to prove affordability to get on the ladder.
It's a different story for remortgagers, however, who have been feeling more of the effects. The volume of remortgage applications dropped by 12% in April while purchase applications dipped by 7%, with further analysis indicating that remortgaging activity is becoming increasingly restricted to those who've been on the property ladder longer – i.e., to those with more valuable homes who have built up a higher level of equity.
The average value of a remortgaged property was up 6% in April reaching £299,375, while the typical equity put forward jumped by 10% from £124,375 to £137,178 – a significant sum of money, and perhaps showing that even current homeowners will find it difficult under the scrutiny of new affordability criteria.
However, it's not all bad news. Despite the monthly falls in remortgage and purchase applications, both figures are still 29% higher than those recorded in April 2013, indicating that the mortgage market is still very much active.
Brian Murphy, head of lending at Mortgage Advice Bureau, commented on the findings:
"It's a promising sign that confidence appears unshaken among younger borrowers. We have seen the average age of buyers seeking a mortgage slowly falling over the last 12 months, which is a symptom of greater opportunity and movement in the market.
"A degree of slow-down was inevitable in the run-up to MMR, particularly given the exceptionally busy start to 2014. With applications up 29% year-on-year, the mortgage market remains open for business and in far better shape than it was a year ago."
It's hoped that the MMR will actually leave the market far better off than before, ensuring borrowers won't be left struggling in the face of rising interest rates, and what the MMR has done especially well is highlight the importance of getting suitable advice in order to secure that mortgage. Preparations need to start months in advance to get finances properly organised, ensuring you're able to show lenders you can afford the mortgage both now and when rates rise.
Getting the right mortgage remains key, however, thereby ensuring your repayments will remain affordable. Opting for a fixed rate is a great way to help you budget effectively, and given that rates are slowly starting to rise it's a great time to get searching to keep repayments as low as possible for as long as you can – so first-time buyers and remortgagers alike will be able to get that dream home.
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