Mortgage Market Review Hits Hard those with Low Incomes and Borrowers Who Have Dependents
After the MMR (Mortgage Market Review) new mortgage lending limits have arisen and those with low incomes and borrowers who have dependents have been hit hard as per a new Intermediary Mortgage Lenders Associations (IMLA) report among brokers and lenders. Essentially, IMLA identified 85 percent of low income borrowers, 77 percent of borrowers who have dependents and 38 percent of single or self-employed borrowers as the various kinds of borrowers whose the MMR has had a huge impact. At 72 percent, borrowers who have dependents, according to brokers, are the hardest hit with low-income borrowers closely following at 60 percent while self-employed borrowers come third at 47 percent.
Falling loans and established declines
The total MMR impact on borrowers or consumers at large is not very clear and opinion is varied. Essentially, over 60 percent of brokers believe a lot of borrowers are currently being denied due to stress tests on interest rates with 15 percent of all lenders agreeing that this is the case. Fundamentally, the difference could indicate lenders report on particular trends seen in specific businesses, but brokers work with more than one lender and their view reflect that of the entire market. Perhaps, brokers are also advising borrowers after discussions about their needs and finances to think again about submitting applications to lenders.
Interest rate stress test has an impact
Nonetheless, both lenders and brokers seem to agree there is a direct impact from stress tests on the amount that can be borrowed by consumers in contrast with alterations to the approval of the MMR process. About 79 percent of all brokers believe the stress test of the interest rate has lowered the amount available for borrowing while 55 percent of lenders agree it is the case. 35 percent of brokers believe stress tests have had an impact on the loan sizes by over 10 percent.
For lots of lenders, the switchover to MMR has been a gradual one. The real test is expected after six months where the effects of the switchover will be ascertained if they have endured or eased off. According to IMLA, the effect of interest rate stress tests on borrowers shows that they are effective in ascertaining those borrowers who might struggle to do their repayments in case the rates go up. A short-term pain might be involved for those who end up borrowing less than the amount they wanted but a very important move that will protect their financial footing in the long term in case the inevitable increase takes place.
Brokers vital in the process
Lenders are very careful to ensure reasonable checks have been balanced with an interest of finding out the answer to the needs of the borrowers. Brokers have become a very important part of the new changes with their advice highly required and valuable, especially in matching a consumer to a good product and lender. However, it is obvious options already available have hugely diminished for a number of borrowers in contrast with others. Under Mortgage Market Review, innovation must be encouraged so that fresh solutions are provided to consumers who are creditworthy in diverse circumstances.