A few days ago I was invited by Experian to discover the findings within their latest report on, what the industry has nicknamed, the stress test. The Financial Conduct Authority brought int the Mortgage Market Review (MMR) in April last year as a result of tightening the mortgage process. These new rules are designer to ensure you can, not only afford your mortgage today but also in the years to come should the interest rates change. So one year on, do you know about the MMR and more importantly do you know ho it effects you when looking for a mortgage? Experian have been investigating with some fascinating results.
Shockingly from those surveyed by Experian, 46% stated that they had planned to buy a property before the introduction of the MMR but had failed to do so.
A quarter surveyed by Experian claim that the MMR had a direct impact on their decision, but unsurprisingly the results varied depending on location.
There is no doubt that it is harder to attain a mortgage than it was before the MMR, and is that a bad thing? Many lost their homes through the property crash due to being unable to meet their mortgage payments. I think there are many misconceptions about the MMR but one thing is sure, you can no longer ignore when seeking a mortgage is your credit score.
Honestly – how many of you check your credit report regularly?
Many of us believe we have a good or bad credit without actually gaining the facts. Something as simple as adding your name to the voting register can have a positive impact on your report. 46% had never checked their credit report, thus they had no way of understanding their eligibility for a mortgage.
You need to engage with your credit score, especially in the time leading to you applying for a mortgage. Experian recommend that you have a minimum of 3 months of a good score before applying. Your mortgage lender now has the ability to scrutinize your spending so shouldn’t you do too? This way you can have control, you can start introducing good habits such as clearing overdrafts and cutting back on those luxurious and random purchases which truthfully you don’t really need at the moment.
The fact is the MMR makes obtaining a mortgage safer as you need to be a financially stable position, but yes you do have to jump through a few extra hoops. What is worrying is that 62% were not aware that you require a larger deposit than previous years. We all know how difficult it is to save for a deposit, and knowing the size of the deposit now required it can seem like an unachievable task. With some financial planning and restricting your spending you can put measure in place to make it happen. Owning your own homes is as much as a sacrifice in preparation as it is a pleasure when you get your own keys.
You’ve applied for a mortgage but been declined, you’ve checked your credit rating on Experian and it looked good. Although credit referencing agencies such as Experian can advise you have to achieve a better credit rating, and their records have a bearing on the result all mortgage companies have their own systems for assessing your eligibility.
The computer has said No! Why? Did you ask?
11% of those surveyed by Experian never asked their lender why, therefore they are unaware who to improve it. This levels them at a disadvantage when it comes to improving it.
What I learned from this report is that you should not shy away from your credit score, and in fact you should be engaged in it.
A home is the biggest asset the majority of us would ever own, therefore give it the respect it deserves and make sure you are in control.