The Money Shot - a big mortgage special

Monopoly board
Monopoly: Actually more interesting than the paperwork now required to get a mortgage (Image: Dayland Shannon)
"It's been a good year for mortgages, the market is on the way up... Lenders don’t want to put the kybosh on that," James Cotton, London & Country
  • | by Kristian Dando

How would you feel if you had to let a bank or lender pore over every single financial transaction you make with a fine-toothed comb, judging you accordingly?

Well, as of Saturday 26 April, prospective homeowners and those looking to remortgage will have to hand over half a year’s worth of bank statements to lenders for their spending habits to be approved.

It forms part of the Mortgage Market Review, a stringent new set of requirements introduced by the Financial Conduct Authority (FCA) which intends to help weed out unsuitable candidates and bring a new sheen of professionalism to the lending industry.

The FCA’s measures certainly seem intimidating, although there’s nothing to suggest that a potential buyer couldn’t live like a 19th-century Quaker for half a year to convince their lender their lifestyle is ‘compatible’ with having a mortgage before embarking upon an expensive, year-long bacchanalian odyssey which would make Keith Richards blush. Obviously, you really shouldn't do this.

The measures also fail to take into account that people’s circumstances change, suddenly. A happily child-free couple could secure a five-year fixed deal then, quite conceivably, produce two squawking, money-draining bundles of joy midway through the terms. Accidents do happen, after all.

There’s also the very real possibility that, as usual, first-timers and younger prospective buyers will be hardest hit by the measures, that group once again carrying the can for the excesses of the boom years.

But the general feeling is that - despite the mountains of paperwork, lengthy interview processes and declaration of intimate details - the new measures won’t necessarily be a bad thing and will put an end to people borrowing to the absolute limit, only to find they're unable to keep up with repayments if – or, more probably, when – rates go up.

Besides, James Cotton, mortgages expert at London & Country, reckons that some of the scaremongering in the media – the Guardian’s advice to ditch your Netflix accounts and stop eating out altogether, for instance - might just be wide of the mark.

“The reality is we’ll have to wait and see," said James. "It’s been a good year for mortgages, the market is on the way up. Lenders don’t want to put the kybosh on that. The rules aren’t prescriptive, and individual lenders will interpret them as they see fit.”

So while your subscription to Spotify or a spot of moderate carousing probably won’t scupper your chances of getting a mortgage, you might want to think twice if you’ve got £200 going out on football accumulators or online bingo every month and do a bit of preparation before you apply.

“Think about getting your credit score checked out in advance,” says James. “And also make sure you’re on the electoral role.

"Mortgage advisers will help you find a rate that you are likely to be accepted for, and one failed application isn’t going to suddenly make your credit score go from good to terrible. However, if you make several failed applications, then you may have problems."

In fact, if you're thinking of buying or remortgaging, the new regulations could provide an opportunity for you to re-examine your spending habits. “It’s a check on the overall balance sheet – what’s going in and what’s going out," said James.

"If you are applying, it’s probably a time for a financial spring clean to see if there are ways you can cut your bills."

So, for now, it’s a case of wait-and-see. However, the Money Shot dreads the uncomfortable moment when it’ll have to justify to a stern financial services type the alarming amount it spends on ‘impulse’ buys of multi-packs of Monster Munch and fizzy pop to keep it going through those dark, long and joyless winter nights.

Short change – money news in brief

While we’re talking about mortgages, first-time buyer rates are at levels unseen since before the crash.

Co-Operative Energy has revealed price rises, which it blamed on government-imposed costs of green policies.

Center Parcs has been forced to pull a series of adverts for a promotion, which was found to be encouraging parents to take their little darlings away during term time.

Online banking customers are going to get more protection if they accidentally wire money to the wrong account.

And finally

In case you’d missed it, managerial comings and goings at Manchester United have been in the news this week. And one fan’s very personal mission to shake things up has come to a conclusion.

An anonymous fan elected to have the slogan ‘MOYES OUT!’ tattooed on his buttock in February. Just two months later, the Glaswegian has been shown the exit door, leading the soccer-mad punter to have ‘Job complete!’ emblazoned underneath it. Charming.

Join us NEXT WEEK for another THRILLING instalment of THE MONEY SHOT.