April 2014 saw the newly formed regulatory body the Financial Conduct Authority (FCA) carry out a Mortgage https://www.beaconfinancialtraining.co.uk/wp-content/uploads/2020/06/cemap-online-and-classroom-training-uk.jpget Review (MMR). It was undertaken to reassess how lenders were lending, and to continue ensuring that any lending was approved in an affordable and understandable way.

Many in the industry had already begun to make changes, meaning that the impact was not as noticeable to borrowers. Nonetheless, there were subtle changes that had an effect on both borrowers. Mortgage advisors were also affected, as their CeMAP training material was amended to reflect the review, along with its outcomes and implications.

The defining element of the Mortgage https://www.beaconfinancialtraining.co.uk/wp-content/uploads/2020/06/cemap-online-and-classroom-training-uk.jpget Review, as well as ensuring that lenders were not approving what could be deemed as ‘risky’ borrowing, is that advisors can no longer provide mortgages on an information-only basis. If a borrower wanted to speak to a mortgage advisor either on the phone or face to face in branch, they would be provided with advice on the most suitable mortgage product for their individual needs and requirements. Some lenders still offer an information-only route, where the borrower must apply online.

Borrowers can now expect the following:

Longer interviews and more stringent affordability

As mortgage advisors now only provide mortgage on an advised basis, they look really closely at a borrower’s income and outgoings, maybe asking for bank statements to assess in more detail. As part of the assessment to see how much potentially could be borrowed, lenders now have to assess the impact a rate increase could have on the borrower, to ensure that payments could continue to be maintained. These additional checks mean that the interview process is taking longer, and it is essential for the borrower to be aware of the importance of allowing sufficient time.

Improved training for advisors

Before the review, if a mortgage advisor was not giving advice and was providing the mortgage on an information-only basis, then there was no need for them to obtain the relevant qualification. Post MMR, as anyone providing mortgages must provide advice, and all advisors must undertake the appropriate CeMAP training and pass in order to obtain the required qualification.

Key points that are now factored into the affordability include:

• Existing credit commitments
• School fees and contractual child maintenance payments
• Children
• Other contractual outgoings, such as gym membership and television subscriptions

Subprime and interest-only lending

As before, a large number of lenders will still avoid those with a less-than-glossy credit history, but there are still some who will look at and assess on an individual basis, as long as proof of income, among other factors, can be provided. It is a similar story with interest-only borrowing; lenders may still approve subject to there being concrete evidence of a repayment plan.

So, the changes made have not been huge, but have been subtle enough to ensure that lending is considered in an open, honest and transparent fashion, to prevent a repeat of the financial crisis that saw many forced to sell their home or, worse still, have their property repossessed, as they borrowed more than they could afford.

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