New mortgage rules require disclosure of full monthly outgoings

New mortgage rules are coming into force next month will inevitably lead to fewer mortgages being granted, say experts.
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From next month, stiff new regulations will make home buying even more difficult for beleaguered Londoners who already face a shortage of available properties, the nightmare of sealed bids and rapidly rising prices.

Borrowers will be required to disclose all their monthly outgoings - from credit card and student loan repayments to season ticket costs and how much they spend on child care or school fees - before they are given a mortgage.

Experts say the Mortgage Market Review, drawn up by the Financial Conduct Authority, will “inevitably” lead to more buyers being refused mortgages or being offered much smaller amounts than they need.

Simon Gammon, managing partner at Knight Frank Finance, said the review would force banks to lend responsibly by making a detailed assessment of their customers’ finances before offering a loan. 

“You have really got to show that you can afford the mortgage and will have to back up your outgoings with three if not six months’ worth of bank statements.

“I absolutely believe there will be a higher number of declined mortgages, but in a situation where interest rates are likely to go up next year, borrowers have to be careful.”

Under the new system banks will base mortgage offers not on borrowers’ salaries, but on how much disposable income they have. Thus someone earning £30,000 but with few regular overheads might well be able to borrow more than someone earning £50,000 but also paying for school fees.

It is widely believed the review will slow the mortgage system, making it crucial buyers arrange their mortgage offers well in advance of starting to search for property. 

Lucian Cook, Savills’ director of residential research, warns: “In London, where you have got some very expensive house prices, any restriction on lending is going to bite. Buyers will be forced out of the capital and have to look further afield for cheaper property.”

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