If you do not plan to use a mortgage to buy a property then you can ignore this post. If you are, then this is important.
The Mortgage Market Review (MMR) was launched about 4 weeks ago by the Financial Conduct Authority. The idea was to create a system that ensured that the banks lent responsibly, i.e. they wanted to avoid situations where people could self-certify their earnings and/or the banks would lend insane multiples to people’s earnings.
As you are aware I am not a fan of government intervention. My view is that if an individual is stupid enough to want to borrow a sum of money that they will not be able to repay/ or the bank is idiotic enough to lend to such an individual then both the individual and the bank should suffer the consequences of their actions. Unfortunately, despite all evidence to the contrary, the dead hand of government feels that regulations are a better way to handle markets than to allow the markets to run their natural course.
Unsurprisingly there will be unintended consequences. In the first instance the MMR is causing huge delays in mortgage applications. Prior to the MMR you could expect to arrange an appointment for a mortgage application form – The “Pre Meeting Fact Find” is 16 pages of unbelievably dull questions including sections on “Basic Quality of Living Expenditure” and “Basic Essential Expenditure” which contained 18 questions including ones about which magazines I subscribe to.
I lost the will to live just reading the form let alone trying to complete it. And this is even before I get to the meeting…
As there is no precedent to judge how the FCA will react to any perceived failing in due diligence, it is clear that the lenders are running scared of being fined by the FCA. As a result they seem to have gone slightly over the top to ensure that they do not contravene the new legislation.
Unfortunately there is little that you can do to avoid this if you want a mortgage. Therefore it is imperative that you find a good mortgage broker who can help you avoid most of the wasted time and stress that has been added to the process.
It is certainly more important than ever to make sure that your finances are in place before you start looking for a property.