Continued confusion around the new rules have left many disappointed since the Mortgage Market Review (MMR) was launched last year. A quarter of people surveyed claim that the MMR has impacted their ability to buy a property, whilst another third report that the changes have made them feel less in control when it comes to securing a mortgage.
The research highlighted that almost half of the respondents have overlooked the basics when it comes to financially preparing to apply for a mortgage. They have never checked their credit report, meaning they have no insight of how a lender might view their ability to repay the money.
Head of consumer affairs at Experian, James Jones commented on the report; “preparation is key to successfully navigate the mortgage market post MMR. Understanding the affordability rules and how lenders now make their decisions is key. It can take time to build a positive credit history, showing a solid track record of positive money management, it’s important to start preparing as soon as you make the decision to buy”.
So one year on after the MMR, it seems many people are stuck in a bit of a muddle, more needs to be done to explain the impact of the new rules and to encourage better personal finance planning. This way new home buyers will fully understand the rules and they will stand a much better chance of securing a property that they can afford.
Experian CreditExpert have put together some simple tips to help you prepare for that 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 months’ 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 – e.g. that all of your open credit accounts are recorded and that any old accounts have been marked as “settled”. 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 you’re 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. Don’t 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 being turned down, so don’t overlook the details.
To read the full report The Mortgage Muddle – One Year After the MMR, click here.