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Mortgage Market Review Already Causing Delays For Borrowers

Mortgage Market Review Already Causing Delays For Borrowers

Mortgage Market Review Already Causing Delays For Borrowers

Would be residential property buyers are dismayed about the change of the rules on residential mortgages, with strict lending criteria tightened following the introduction of the Mortgage Market Review (MMR).

Since 26th April 2014, mortgage lenders have been required to carry out much more detailed checks of a borrower’s financial situation to be sure that they can truly afford to purchase and continue to afford the property, both now and in the future.

The introduction of the MMR is supposed to help regulate the residential property purchase market and does not yet apply to buy to let mortgages, but that could happen in time.

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Bank of England's Funding For Lending Scheme Beginning To Have Effect

Bank of England’s Funding For Lending Scheme Beginning To Have Effect

The £80 Billion (GBP) Funding for Lending Scheme (FLS), launched in August by the Bank of England (BoE) and HM Treasury, is starting to show signs of having a positive effect.

The multi Billion pound scheme designed to unclog the flow of credit to the UK’s residential homebuyers is having the desired impact as official figures show an upturn in mortgage approvals.

The Funding for Lending Scheme (FLS) makes money available to banks on the condition they pass it on to businesses and households in the form of cheaper loans and mortgages.

The Bank of England have stated that the number of loans approved for residential property purchases rose by 2,103 to 50,024 in September 2012 and the number of loans approved for re-mortgaging increased by 1,860 to 28,343.

Meanwhile, unsecured consumer credit has also increased by £1.2 Billion (GBP) in September 2012, the sharpest rise since February 2008, including an increase of £307 Million (GBP) in credit card borrowing while the remaining £900 Million (GBP) came from overdrafts and unsecured personal loans.

Borrowers have faced even tougher times trying to take out a mortgage in recent months as lenders tightened their lending criteria even further, causing a drop in the proportion of mortgages approved.

The average interest rate on new mortgages also fell slightly, from 3.84% to 3.77%, offering some hope that the recent rise in borrowing costs may also be starting to ease.

Governor of the Bank of England, Sir Mervyn King, said that “More than 20 banking groups, including the five largest lenders in the UK, have signed up to the Funding for Lending Scheme, while funding costs have fallen by around one percentage point”.

However, Sir Mervyn warned the initiative was temporary and lenders would have to accept further losses if normal banking services are ever to make a return.

The reductions in borrowing rates have primarily been aimed at households taking out mortgages with low Loan-To-Value (LTV) mortgages. So they may not help first-time buyers (FTBs) much.

As mentioned last week, borrowers are still faced with some degree of uncertainty when looking for mortgages or credit as despite all the positive noises made by the BoE and the Government, banks are still fairly reluctant to lend.
Read last week’s top story here.

The simplest solution may be to become your own bank!

There has been yet another survey conducted in the UK with yet another set of shocking and depressing findings…

The YouGov / Shelter survey reveals that almost 7 Million people are relying on some form of credit to help pay their housing costs, using payday loans, unauthorised overdrafts, other loans or credit cards.

The results reveal the spiral of debt that people are falling into in order to keep a roof over their head.

The survey asked 4,014 people in the UK if they had used payday loans, unauthorised overdraft, other loan or credit cards to help pay their rent or mortgage in the last 12 months.

15% (1 in 7) said yes, representing a national figure of almost 7 Million people, with almost 1 Million people using payday loans.

The homeless charity warns that 2012 could bring with it an increased risk of homelessness, for those who are struggling with their housing costs and is urging anyone worried about their debts to make seeking early debt advice their New Years resolution.

Shelter has a network of specialist advice services around the country, a free telephone helpline and online advice available at shelter.org.uk/debt, including a new budget calculator. 

Campbell Robb, Chief Executive of Shelter, said, “These shocking findings show the extent to which millions of households across the country are desperately struggling to keep their home. Turning to short-term payday loans to help pay for the cost of housing is totally unsustainable. It can quickly lead to debts snowballing out of control and can lead to eviction or repossession and ultimately homelessness. Every two minutes someone in Britain faces the nightmare of losing their home. We urge every single one of these people now relying on credit to help pay their rent or mortgage to urgently seek advice.”

Martin Lewis of MoneySavingExpert.com, said, “The UK is the crock of gold at the end of the rainbow for the world’s payday lenders. They’ve been regulated out of other countries and jump for joy at our lax supervision. That’s why these 4,000% APR lenders are exploding across British high streets. Yet these astronomical APRs aren’t the real danger and that comes from the rollover. This is where people can’t repay at the end of the month and compound interest kicks in. It’s incredibly worrying there’s now evidence of people using payday loans to meet housing costs. Many struggling with core rent or mortgage commitments will struggle to repay payday loans on time too. While it’s an obvious temptation to grasp these loans as a lifeline, in the long run it may hurt more than help. Instead I’d urge anyone struggling with payday loan and housing debts to get in touch with one of the great non-profit, non-judgmental advisors out there, such as Shelter – the sooner the better.”

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