Mortgage Market Review
The mortgage market review, or MMR, marks arguably the single biggest change to the mortgage market in recent memory.
We’ll explain what the MMR is and go through the changes that have been made and the reasons behind them in this quick guide.
What is the mortgage market review?
The housing market boom and bust in 2007 and 2008 served as the key drive behind the need for a change in the mortgage market embodied by the MMR.
By 2007, the increasing ease of availability of mortgages reached a peak. Customers were finding it easier and easier to get hold of mortgages with little to no deposit required, but the dangers of this liberal lending were getting ever clearer until the market finally collapsed in 2008.
Banks and building societies began to implement various changes to their mortgage lending procedures soon after this but it was not until April 2014 that the mortgage market review fully came into play.
What are the main changes to the market?
Given that the big force that caused the market to crash when it did was wanton lending of money to those who simply couldn’t afford to pay it back, the biggest change implemented with the MMR is in the assessment of affordability.
Previously, a mortgage lender would have assessed your eligibility to borrow based solely on your income, usually making calculations based on a simple multiplication of a payslip you would be asked to provide.
Since the implementation of the changes, lenders will now make a significantly more detailed assessment of you as a borrower, looking at your regularly outgoings as well as your basic income to get a picture of your overall financial position.
This will include everything from outstanding regular loan repayments to things like Netflix subscriptions and phone bills.
This test of eligibility is the responsibility of the lender, and with this comes the need for them to provide reasonable and helpful financial advice to borrowers in order to make sure that you stay able to keep up with repayments.
Another big change is a significant restriction on the availability of interest-only mortgages.
With an interest-only mortgage, your monthly repayments will consist only of the interest charged on the amount you borrow, with the remaining capital to be repaid at the end of the term (or during it if you happen to come into enough cash).
With the changes associated with the MMR, those who want to take out an interest-only mortgage will have to provide a detailed repayment plan in order to prove their viability as a borrower.
What if I already have a mortgage?
If you already have a mortgage taken out, then the changes associated with the MMR are unlikely to affect you drastically until such time as you come to remortgage.
Will I still be able to get a mortgage?
While some will find it harder to get a mortgage altogether, and more will find themselves having to pay more up front as a deposit, the aim of the changes is not simply to reduce the number of people actually borrowing but rather to promote responsibility in the lending process.
The idea is to make sure that those who should be taking out mortgages can and so as long as your credit rating is acceptable and your income and expenditure balance well enough, you’ll still be able to borrow what you need.
Now that the market has changed and the requirements on borrowers are more stringent, it’s more important than ever to make sure that you’re clued up on the mortgage market in general.
Be sure to read through our guides on the specific aspects on mortgage borrowing and when you’ve settled on the kind of product you’re after, head over to our mortgage comparison page so that you can start borrowing at great rates right away.