One year on: MMR leaves many borrowers trapped in ‘mortgage prison’

?It's now been one year since the Mortgage Market Review (MMR) came into effect, and in the space of just 12 months, millions of Brits have been a…

It’s now been one year since the Mortgage Market Review (MMR) came into effect, and in the space of just 12 months, millions of Brits have been affected by it.

Indeed, released to mark the anniversary of the initiative, a spate of separate studies have revealed how, in a bid to ensure that UK lenders are more responsible and only green light mortgages to borrowers able to afford them, both existing homeowners as well as those consumers desperately trying to get a foot onto the property ladder have been affected by it personally.

So, with one year gone, how has the MMR changed the mortgage market in the UK, and why do some borrowers welcome the changes while others despair of them?

Mortgage lending down as banks get strict

For starters, statistics released by the Council of Mortgage Lenders (CML), an organization representing all of the nation’s main banks and building societies, show there has been a marked decline in the number of home loans being approved over the last 12 months.

In fact, the figures show that, while some 48,000 new mortgages worth a collective £7.8 million were approved in February of 2014, in the same month of this year, that number had dropped, with just over 40,000 mortgages worth a total of £6.8 billion approved over the same period.

Clearly, then, if the aim of the MMR was to reduce the number of Britons taking out a mortgage, and so by implication reducing the likelihood of a lender getting stuck with a bad customer unable to meet their repayments, the initiative is having the desired effect.

However, while the banks and building societies may well be happy that they are less exposed to risk, both mortgage holders and those attempting to get a mortgage are much less likely to be upbeat about what’s been happening over the past year.

Above all, Brits determined to leave the rental sector and buy a place of their own are likely to be most frustrated by the MMR, not least since the number of applicants being denied ‘at the first hurdle’ has risen significantly.

Borrowers subjected to more personal questioning 

One of the things that made the most headlines this time last year was the fact that the terms of MMR would prompt lenders to be more thorough in their screening, potentially asking personal questions and making the whole mortgage application process significantly more upsetting and stressful than ever before.

Notably, it appears that such fears were not in vain, with the Telegraph reporting that growing numbers of consumers are complaining of being made to feel uncomfortable about the questions being asked by lenders, plus even those who do manage to jump over the first hurdle will often find that the slow speed of such a thorough vetting process works against them in such a competitive

As Mark Hayward, managing director of the National Association of Estate Agents explained to the paper: “The longer transactions take to go through, the more chance there is that the chain will break.

“Lenders are asking a lot of additional questions about income and affordability, which slows the process. Last summer when house prices were rising rapidly we saw a lot of cases where buyers were ‘gazumped’ by higher offers just weeks after agreeing a sale.”

Retired borrowers and self-employed stuck on high rates

However, it’s not just the (generally young) would-be borrowers who are struggling as a result of the introduction of the MMR.

According to the latest figures, growing numbers of retired and self-employed borrowers are suffering as a result of the changes to the banking industry, with many.

To begin with, not only have the new rules effectively spelt the end of self-certification mortgages, thereby making it nigh-on impossible for workers without a fixed, provable income to get a loan, they have also led to many people trapped on higher rates and unable to switch to save money.

Indeed, the Scotsman is just one of many publications reporting a rise in so-called ‘mortgage prisoners’, and this number is expected to keep going up as many more people struggle to get approved by a rival lender and so have to stick with an existing deal, even if this means they end up paying over the odds.

Above all, the figures compiled in the year following the introduction of MMR serve to further highlight the importance of getting debt-free and putting personal finances in shape before attempting to apply for a mortgage, plus, of course, the importance of shopping around for the very best deal at all times.

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