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New Loan Rules Causing Stress

Written By On 15/05/2014

The new Mortgage Market Review introduced by the Financial Conduct Authority at the end of April is starting to cause a lot of controversy as most brokers were anticipating.

The application process for anyone requiring any type of home loan is now much more ardent and laborious.

The 'stress test' will ask about every single incidental expense from your dentist's cost down to how much and how regularly you fork out for a haircut.

Mortgage broker Ray Boulger commented:

The key failure in the system is lenders are not taking into account people's savings. Lenders appear to assume savings are irrelevant and that people will blow all their money.

The process of applying for a mortgage is now taking up to three hours, plus brokers are reporting that lenders are taking up to fifty per cent longer in satisfying them one way or another.

Unfortunately for borrowers, lenders are approving one in five loans less than they were before the new set of rules came into practice a few weeks ago.

The FCA brought the MMR to the table in the interests of the public, to prevent them from finding themselves unable to afford their loan. However, it appears to be having an adverse effect for many, but at least they are managing to experience the stress!

The financial ombudsman reported this week that they received 13,600 complaints about home loans and secured loans, up by six per cent on the previous year. Most of them were related to affordability and appear to have not anticipated their problems early enough.

Bank of England governor Mark Carney announced yesterday that the Bank have upgraded their growth forecasts. The comments that Mr Carney made indicates interest rates will remain at 0.5 per cent until the second quarter of 2015.

Many financial experts believed that rates may be on the rise as early as this year, but the Bank said that the economy has 'enough slack' to deal with inflation.