Property Blog: MMR – We’ll get by with a little help from our broker friends
Not to be confused to the measles, mumps and rubella vaccine, in property terms MMR stands for Mortgage Market Review. With the latest review scheduled for next month, Lynne McCaffrey considers its potential impact on borrowers.
“While those of us in the property industry will be fully aware of the forthcoming Mortgage Market Review, there is a good chance the majority of existing homeowners and future borrowers will be somewhat oblivious to the approaching changes.
“The primary focus of the MMR is around the issue of affordability and implementing stringent tests to ensure the borrower can not only afford the mortgage payments now but also in the future.
“Yes, that’s right lenders are being asked to get all Mystic Meg on us and predict future rates! Far from an exact science, lenders are therefore expected to stress test borrowers against their existing standard variable rate plus an additional percentage to take into account future base rate movements.
“While many mortgage brokers already apply this forward thinking when helping borrowers find the most suitable mortgage, there is a general belief that by passing this responsibility to lenders will make it harder to get a mortgage. In fact lenders have even warned decline rates could soar under the new process. And just when we thought we had turned a corner!
“As frustrating as it may appear it is understandable why these tests are being ‘officially’ introduced. We are constantly seeing warnings about how any increase the Bank of England base rate could see homeowners face considerably higher mortgage repayments. A 0.5% increase, for example, would see repayments for a £150,000 mortgage increase by £750 a year. With many households still having to tighten their belts, there’s a real possibility they may struggle to meet these higher repayments.
“But that said we can’t predict the future – at least I certainly can’t otherwise I’d be on a private island toasting yet another lottery win! So many are disgruntled that homeowners could be penalised and decline a mortgage on the basis of something that could never happen.
“There’s a social media campaign trending on the likes of Facebook and Twitter at the minute. Has anyone seen it? #100HappyDays poses the question - ‘Can you be happy for 100 days in a row’. I love this idea because so many of us concentrate on the bad when we have so much to be happy about. That’s why I’m determined to not let anything get me down – even the forthcoming MMR – so I will end this week’s blog on a positive note and what I see as a solution.
“While the responsibility of affordability checks will ultimately lie with the lender rather than a mortgage broker, the need to consult a mortgage adviser will be even more important than before.
“A mortgage broker or financial adviser will still need to carry out detailed scenario planning to illustrate and help prove a borrower’s affordability. With such stringent tests, borrowers may find it difficult to satisfy the lender's requirements without the assistance of a financial professional. Mortgage brokers will also have a better understanding of the new processes adopted by lenders and, as time goes on, work out ways to accommodate their requirements.
“There are very few things in life as rewarding as buying a property and making it your home. The idea of having that taken away would be devastating and something you would do anything to avoid. These affordability checks are that anything. Look at them as a way of making sure your house remains your home. I’m not saying it’s going to be easy – in fact chances are it’s going to be incredibly frustrating – but good things in life seldom are!”
Lynne McCaffrey is a licensed conveyancer with over 18 years experience. As Head of Property at Goldsmith Williams Lynne is responsible for the day to day running of the property department, which specialises in conveyancing, remortgage, buy to let and bridging.
Content correct at time of publication