Dont know your MMR from your LTI Mortgages Made Simple by John Lineham

By the Beresfords Marketing Team - 25th August 2014

This year sees the implementation of the Mortgage Market Review (MMR), introduced in April, and the Loan to Income (LTI) cap, which will come into effect in October. The world of personal finance is littered with acronyms, and our job is to help people understand them and what they mean for them in their everyday lives. Read on to make sense of the mortgage maze:

MMR was introduced by the Financial Conduct Authority (FCA) as a result of the financial crash and build-up of sub-prime mortgage debt. The new regulations look to ensure that the borrower can afford to repay the loan, for example when interest rates rise. Applicants are now asked to give more detailed personal information on their financial situation. This can include how many children you have, where they go to school, the cost of your travel season ticket and on what you spend your disposable income. 
Essentially, this means there is more paperwork involved in the process and applicants have to undergo more diligent stress-testing of their financial situation, but don’t let this put you off! The number of approvals was up 11% last month, and there are also some highly attractive mortgage products currently available. You can see costs and a whole lot more, whether you are a first time buyer, re-mortgaging, buying your next home or investing in buy to let, by looking at our live ‘Best Buy’ mortgage tables.

The Loan to Income cap was created by the Bank of England and applies from 1 October, and will stipulate that no more than 15% of all new mortgage lending should be above 4.5 times the borrower’s income. Currently only 11% of UK bank lending exceeds that ratio, so that cap is unlikely to affect the majority of borrowers. The current average ratio on new mortgages stands at 3.4 times income. We are still seeing loans approved which are lending five times the income of the borrower but these will become less available in the run up to the cap. Buyers must be aware of the changes and make sure they get qualified advice. We have produced a booklet to help guide people through the changes in the process.

These new regulations were created to ensure that lending lessons were learnt and mistakes weren’t repeated. The fundamental reasoning behind these changes is to ensure that people don’t overstretch themselves and can afford their mortgage even if rates rise and that can only be a good thing.

At Beresfords Mortgages we have a team of fully qualified independent advisors on hand to discuss any questions you have about the changes to the mortgage market. We also have access to some of the best products currently on the market, so please get in touch to find out more.

This communication is issued by Beresfords Group Ltd of which Flagstone Financial Management Limited (trading as Beresfords Mortgages) is a wholly owned subsidiary. Beresfords Group Ltd is not permitted to provide regulated mortgage and insurance advice, this is provided by Flagstone Financial Management Ltd’