For the last few years since the recession hit the country we all know how hard it is to find a good mortgage deal let alone be approved for one, if the Financial Services Authority (FSA) have their way then applications are going to be more intrusive and many more mortgages are going to be turned down.
The FSA are hoping to push through new guidelines about how to perform risk assessments on customers to make sure that they can afford the mortgage repayments. If the proposal goes through then you will be penalised for having a gym memberships, going on holidays and even for spending money on leisure and entertainment. In future mortgage lenders will ask to see bank statements for the last 6 months, these will then be analysed to see what potential mortgage customers spend their money on. Using this as evidence a lender can choose to decline lending the money for a mortgage if they could prove that the customer wouldn’t be able to afford it.
At the moment utility bills, council tax and other general bills are taken into consideration but if a lender sees that you are a shopaholic or spend too much on meals out and entertainment then you will be turned down for a mortgage.
In the FSA’s defence they say that when a customer applies for a mortgage they have to assume they will continue to spend money the same way prior to having a mortgage so they don’t take into account that most people’s spending habits change when they enter into a long term contract such as a mortgage. It’s hard enough for most people to get approval for a mortgage and it looks like it will only get harder, most people who apply for a mortgage have waited years are saving up and sacrificing holidays and or leisure spending. But there are a few that continue to live a blasé lifestyle and choose to grow up and mature only when they are forced to so.
The majority of mortgage holders find that when they have a mortgage and bills to pay things such as gym memberships, mobile phone contracts, Sky TV, holidays and even clothes shopping they sacrifice them so they afford to keep up with the repayments . In the current financial climate only 50,000 mortgages are being approved monthly compared to 135,000 a few years ago, if the FSA get their way then one in five mortgage applications will be denied under the new guidelines throwing the property market into further dismay.