15 Jul

Mortgage changes have limited impact

Mortgage changes have limited impact

New figures show that the introduction of new mortgage rules in the UK have not had a substantial impact on the market.

The data from the Council of Mortgage Lenders (CML) shows that the number of loans to first-time buyers in May increased by nine per cent compared to the previous month - 13 per cent higher than in May 2013.

In terms of value, lending to those stepping on to the property ladder rose by 11 per cent compared to April and stood at 30 per cent more than at the same point last year.

There was a slight change in first-time buyer affordability, with first-time buyers borrowing on average 3.43 times their gross income, compared to 3.42 in April - making the typical loan size equal to £123,200 in May, compared to £121,500 in April.

Also there was a small dip in remortgage lending during May but overall there was little evidence that the changes to mortgage applications had made a significant impact on borrowing levels.

The number of buy-to-let mortgages was up by four per cent and increased in value by five per cent. Compared to last year this was a 14 per cent increased in the number of loans granted and a 22 per cent rise in overall value.

"With May lending figures, we get our first glimpse at the effect the Mortgage Market Review (MMR) has had on lending trends and, at least so far, the impact appears subtle, rather than dramatic," said Paul Smee, director general of the CML.

He added: "First-time buyers and home movers continue to be key drivers in market growth and their activity does not seem to have been noticeably disrupted. There was no cliff edge. Lenders and intermediaries had been methodically working towards applying MMR changes for months leading up to implementation and the figures appear to reflect this."

The changes were introduced by the Financial Conduct Authority (FCA) to ensure borrowers do not over-extend themselves.

It means that people applying for a mortgage are now required to provide in-depth detail about their outgoings to assess whether they can afford the repayments - especially if the base rate of interest was to change in the future.

The FCA changes now include more face-to-face discussion between borrowers and lenders when arranging mortgages as well as ensuring all home loan sellers have the relevant paperwork and qualifications in place to support their application.

It has also limited the number of self-certification mortgage products that are available so that people are not encouraged to borrow more than they can comfortably afford.

It is hoped by the industry the changes will lead to more responsive borrowing and ensure fewer people face financial difficulty in the long-term.

The new rules come from a five-year review of how the UK mortgage industry works, as well as the impact of the recent recession on homeowners.ADNFCR-1222-ID-801735512-ADNFCR

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