Disappointment for almost half of prospective property

Almost half (45%) of those who planned to buy a property since the introduction of the Governmentís new affordability rules last year have failed to do so.

The findings indicate that continued confusion means many people have been disappointed since the introduction of the new rules through the Mortgage Market Review (MMR). A quarter claim that the MMR has impacted their ability to buy a property, while a further third (37%) report that the changes have made them feel less in control of securing a mortgage. These findings are revealed in Experianís latest insight report, The Mortgage Muddle ñ One Year After The MMR.

The research went on to reveal that among those who were unable to buy since the introduction of the MMR, many still appear to be overlooking the basics in financially preparing to apply for a mortgage. Almost half (46%) have never checked their credit report, meaning they have no indication of how a lender might view their ability to repay money.

James Jones, head of consumer affairs at Experian, commented: ìPreparation is the key to successfully navigating the mortgage market post-MMR. Understanding the affordability rules and how a lender makes their decision is the key to success. But it can take time to build a positive credit history and a solid track record of positive money management, so itís important you start preparing as soon as you make the decision to buy.î

In a separate study conducted by Experian in April 2014, just 44% of those surveyed were aware that the MMR would mean that lenders would be more careful about ensuring mortgage applicants could afford their repayments. And one year on, it appears that this ìMortgage Muddleî is continuing to affect many. Of 1,500 respondents who either bought or planned to buy a property in the last year:

ï    62% were not aware that lenders may require bigger deposits (worryingly, 23% believe they could apply for mortgages with smaller deposits than before);
ï    37% didnít recognise that lenders would now be more careful on whether they could afford repayments;
ï    15% mistakenly believe that lenders have now relaxed their lending criteria as a result of the MMR.

In addition, of those who were unable to buy in the last year:

ï    13% do not know how much money they have left over at the end of the month;
ï    18% donít even know what monthly repayments they can afford;
ï    14% did not have a big enough deposit for the property they wanted;
ï    12% were unable to secure the size of mortgage they needed.

Worryingly, 11% of those who were unsuccessful did not know why or havenít asked their lender, leaving them at a significant disadvantage when it comes to improving their chances of being accepted in the future.

ìWe understand that navigating the mortgage market can be tricky for buyers, so weíve launched a useful step-step Mortgage Application Guide available at www.experian.co.uk/improve to give people the best chance of being approved for the mortgage they can afford at the best rate, which could save a significant amount of money in the long run,î

James Jones continued.

Guy Shone, at ExplaintheMarket, commented: îWeíre now one year on from the MMR and it seems many people remain stuck in a bit of a muddle. More needs to be done in 2016 to encourage personal financial planning and properly support aspiring home buyers, so that all buyers fully understand the rules of the game ñ and stand the best chance of securing a property they can afford.”  

Here are some simple tips from Experian CreditExpert to help people prepare for a mortgage application:

1.    Know what you have to spend: Consider what funds you can draw together to form your deposit. The size of your deposit will often dictate how much you face in terms of interest rates and lender fees.

2.    Do your research: Use mortgage calculators and comparison websites or speak to a mortgage adviser to find out where the best deals are and what type of mortgage will suit your circumstances. Work out what you can afford to borrow and repay, both now and if rates rise by 1%, 2% or more.

3.    Scrutinise your spending: Scrutinising your last few monthsí outgoings carefully will help you understand exactly where your money is going. Prepare now by building good habits like increasing the amount you save, clearing overdrafts and cutting back on discretionary spending to ensure you close out the month with even a small surplus..

4.    Check your credit report: As soon as you make the decision to buy, check your credit report with all three credit reference agencies. Ensure everything is accurate and up to date and reflects your current circumstances ñ e.g. that all of your open credit accounts are recorded and that any old accounts have been marked as ìsettledî. If you spot anything you believe to be inaccurate, contact the relevant credit reference agency and ask them to investigate the entry with the lender.

5.    Room for improvement: If your credit report has areas for improvement, make a plan to get it into shape well before making your mortgage application. There are a number of steps you can take, including: ensuring youíre registered on the Electoral Roll; paying down outstanding balances to less than 50% of your limit; paying off more than the minimum repayments on your accounts each month and making sure never to miss a repayment.

6.    Donít fall at the last hurdle: Right before you make your application, take time to do some last-minute checks. Check your credit report again to make sure nothing has changed and everything is accurate right before you apply. Check the exact way your address and other personal details appear on your credit report. Small inaccuracies could see your application turned down, so donít overlook the details.

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