Intrusive measures are being employed by banks in a bid to penalise personal financial extravagance!

Applicants with families, who buy expensive birthday and Christmas presents or take luxury foreign holidays could now face being turned down for a mortgage following the introduction of intrusive new guidelines.

The new rules from Spanish bank – Santander, one of the biggest banks in the world and the UK’s second largest lender of mortgages, will penalise any applicant it deems to be financially extravagant.

Santander may be the first to introduce the intrusive guidelines, but some experts fear other banks and building societies will soon be following suit. The UK’s biggest mortgage lender, Lloyds Group, (inc Halifax and Bank of Scotland), have already imposed similar sanctions on interest-only mortgages.

Spokesman for Priced Out campaign group for affordable homes, Matt Griffith said: “This is ridiculous – no one fails to repay their home loan because they buy gifts for their grandma. Banks are constricting lending to first-time buyers while concentrating on the richer pickings of equity-rich homeowners and investors. As banks scrabble to preserve cash, it seems like we are on the verge of another mortgage crunch.”

The Spanish bank’s questions on occasional spending are far in excess of what is officially deemed fit by the Financial Services Authority, (FSA), after it concluded that only regular spending on essentials and bills needed to be taken into account following the uproar over its original proposal to analyse every aspect of household spending.

Santander’s decision will put a further squeeze on mortgage lending at a time when obtaining a mortgage is already difficult for many.

New mortgage applicants must reveal:

• Salary: 3 months of pay slips or 3 years accounts for the self employed
• Regular Spending: Based on 3 months bank statements including clothing, school fees and energy bills.
• Benefits: Tax credits, pension or maintenance payments
• Credit Record: Detailing if bills are paid on time and going back up to 6 years. Banks also use this to check for truthful submissions.
• Family: Borrowers with children or other dependants will be deemed to have a higher than average monthly expenditure

Santander also check
• One Off Spending: Checks on spending for birthdays, holidays, outings and Christmas presents.

The Spanish bank has already taken steps to slash cheap mortgage deals by telling those who want an interest-only mortgage to come up with 50% of the property’s purchase price.

The bank has issued its brokers with new forms requesting that applicant homebuyers detail all regular expenditure such as bills, school fees, transport, entertainment and clothing.

It also asks for non-regular expenditure, which it specifically sets out as subscriptions, holidays, miscellaneous goods and services, religious festivals and birthdays, to be detailed in a separate column.

Prospective property buyers are not allowed to enter a zero, as this will see their application rejected. The previous application process didn’t ask for any such details.

Santander claims it has been making checks on ‘one-off spending’ for several years. However, experts say the announcement about making more onerous checks was only made last week.

A Santander spokesman said: “The changes will enable us to collect more information upfront about borrowers’ monthly expenditure. This will also make it easier for people to provide all of this information when submitting cases to us”.

A spokesman for the Council of Mortgage Lenders (CML) said: “It’s up to each mortgage lender to decide what information is important from the borrower in order to make a decision on affordability.”