Mortgage blog: New checks see approvals fall by a fifth
New regulations which require lenders to ask potential borrowers a wider range of questions about their spending habits has resulted in a startling fall in the number of mortgage approvals. The Daily Mail reports that approvals have fallen by a fifth since the tougher checks were introduced three weeks ago.
As well as seeing the number of people approved for a home loan fall, the new regulations have also seen brokers complain about an increased waiting time for mortgage offers.
Lender says that stricter rules have resulted in fewer mortgages being agreed
Figures disclosed to the Daily Mail by one of the UK's largest lenders suggest that mortgage approvals have fallen by 20% since new rules came into force at the end of April. The Mortgage Market Review aims to avoid the reckless lending that contributed to the global financial crisis but the new regulations have been criticised for being too strict.
New rules mean borrowers can expect a three-hour mortgage interview and to be forensically quizzed on their spending. Newspapers have reported that potential borrowers are being asked about their gym membership, gambling habits and, according to the Mail, "whether they eat steak or play golf".
The newspaper reports that "there are growing fears that mortgages will soon become more expensive and harder to qualify for".
Some experts believe that the rules have gone too far and that a ‘box-ticking' approach is freezing out some applicants who can comfortably afford to pay a mortgage. Brokers have also complained that mortgage applications which typically took a month to process are now taking five to six weeks.
Keith Osborne, editor of Whathouse.co.uk, says: "I am not surprised that the number of people being approved for a mortgage has fallen since the new regulations come into force. There will clearly be a period of adjustment while banks and building societies streamline their policies although the concern would be that perfectly creditworthy applicants will be refused a loan during this time."
Interest rates kept on hold again
The lending figures come as the Bank of England announced it was keeping interest rates on hold for the 62nd consecutive month. The base rate is to be held at 0.5% for a further month with the Bank suggesting that rates will remain low for the time being.
Bank of England Governor, Mark Carney, said: "Securing the recovery is like making it through the qualifying rounds of the World Cup. That's a major achievement, but obviously it's not the ultimate goal. The real tournament in football is about to begin, and for us it's just beginning in the economy."
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