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Mortgage applicants face tougher questions from today

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New mortgage lending rules from the Financial Conduct Authority (FCA) come into force from today.

The changes, which are the outcome of the FCA’s Mortgage Market Review (MMR), mean mortgage applicants will now face tougher questions about their lifestyle.

Questions on regular outgoings – including food, leisure and childcare spending – could form part of the new mortgage checks.

The FCA said the new rules will “put common sense at the heart of the mortgage market” and prevent borrowers “ending up with a mortgage they cannot afford”.

However, commentators suggest the changes could delay the home-buying process and cause an increase in the number of transactions falling through.

Kathryn Taylor, managing partner at Gordon Brown Law Firm, said that due to a more cautious lending attitude and stringent affordability checks the approval process could take longer with more applications declined along the way.

The MMR rules are designed to ensure people only take out a mortgage they can afford, and to prevent a recurrence of the irresponsible lending practices of the past. They mean most people will get help from an adviser before taking out a mortgage.

Martin Wheatley, chief executive of the FCA, said: “There has been huge effort both by the regulator and the industry to get to where we are today. Since the crisis, lenders have been taking a far more sensible approach to mortgage lending, and the MMR is designed to ensure that this common-sense approach continues. We do not want to see mortgage lending return to the practices of the past where people were taking out mortgages they simply couldn’t afford.

“While for some borrowers the questions being asked may seem more detailed, they should feel confident that practices which led to hardship and anxiety for consumers in the past will not be repeated.”

The FCA said the new regime will prevent a return to self-certification mortgages, as from now, lenders must always check a borrower’s income.

For more detail on how the new rules will affect you, click HERE.

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