A mortgage lending clampdown comes into force today which will see lenders delve more deeply into people’s personal lives, from their plans for parenthood to how they will spend their old age.
The industry-wide changes affect home buyers and people looking to re-mortgage and they will mean that lenders have to take a much stronger interest in people’s spending habits and how their life plans could affect their ability to meet their repayments.
Mortgage applicants will need to sit through longer interviews, provide more paperwork to back up what they are saying and could find themselves taken aback by the probing nature of some of the questions they will be asked.
The Mortgage Market Review (MMR) rules aim to ensure there is no return to any irresponsible lending practices of the past.
But some concerns have been raised that it could slow down the housing market, which has been springing back into life over the last year, as the industry adjusts.
People are likely to be asked for more detail about regular outgoings such as childcare, food, household bills, loans, credit cards, toiletries, hobbies and leisure activities, in order to weigh up whether or not they can afford their home loan.
Lenders will also look for any impact that future life changes could have, such as when they plan to retire and how they plan to spend their old age.
Andrew Montlake, a director at broker Coreco, said that for people considering applying for a mortgage: “It’s important for people to prepare a lot earlier, potentially six months before you apply. Start looking through your documentation and go through a budget.”
Mr Montlake said the questions that were likely to be asked were: “Quite open and difficult to answer” but he added that “people need to be honest with their affordability anyway”.