This will not only affect people who have sold their property and are moving home, but also those whose mortgage deal has come to an end and need to re-mortgage their home. This has many negative impacts on people and could mean that they are homeless after selling their property or that they are stuck with a very poor deal with their current mortgage provider that they are unable to leave.
So what are these new rules and why are they having such a big impact on the market more than a year after their introduction?
The FCA introduced the need for lenders to review bank statements closely to identify all areas of spending which had not been factored in previously. Items such as gym membership and childcare costs can now mean that the lender will refuse a mortgage on the basis of these costs. However in reality, these costs have always been there, particularly when someone has owned a home for a number of years and has paid their mortgage with no late payments or arrears.
The real issue is actually the way that lenders are interpreting these rules and implementing them, showing no flexibility or considerations for any other factors outside of the figures, which is just not realistic, particularly when individuals are not even looking to increase their borrowing.
One woman in Bath has been left to move in with her parents again after she was denied a mortgage when she first was told her mortgage was portable to her new property and contracts had been exchanged. Many older people are struggling to secure loans due to their age, even though they can prove affordability.
HSBC had to pay £500 in compensation after it refused a couple who were over 40 years old a mortgage, as the husband would have been over 65 before the mortgage had come to an end.
It remains to be seen how much of a problem this becomes, but if the projections of 4 million people being affected are true, this could escalate into a significant issue for many people in the UK.
If you have any property questions, please call Sarah Gratton or Jo Ayrton or Laura McCarthy in our Warminster office on 01985 214444 or Sandra Smith and Ian Rhodes in our Westbury office on 01373 865577 or email email@example.com and we will be delighted to help you (there is no charge for initial telephone discussions).