Tougher mortgage scrutiny for buyers from 26th April

The criteria for obtaining a mortgage is about to get tougher from the 26th April. Borrowers will be asked to provide 3 months bank statements and some costs that were not taken into consideration will now be included in the borrowers monthly outgoings.

The new affordability test will make it much harder for some borrowers to obtain a mortgage. Bank statements will be scrutinized line by line and an explanation required for any undeclared outgoings.

Items like childcare and and take away meals will now be included in borrowers monthly costs. One could argue that these costs should already have been included particularly child care costs as these can be quite significant. It is also a sign that the banks and building societies want to make sure that borrowers will be able to pay their mortgages when interest rates go up. These new tests are being overseen by the City Regulator who are keen to unsure the same mistakes are not made again that contributed to the run up to the previous financial crisis.

It will be harder to get a mortgage

New questionnaires will require more details about finances Some experts are concerned that the new rules could be circumvented by mortgage brokers who may advise borrowers to strip out all of their luxuries for 3 months prior to applying for a loan. It is possible therefore that banks and building societies could ask for statements for the previous 6 months if they are not convinced the borrower is telling the truth.

The new questionnaires will differ from bank to bank and none of them has yet disclosed the questions that will be asked. The Mortgage Market Review is being introduced by the Financial Conduct Authority and is one of a series of measures that may be introduced to control house prices. Previously lenders took a cursory glance at the extras that borrowers spend each month but now bank statements will be raked over by a fine tooth combe.