Almost half of all mortgage brokers expect "considerably more customers" to be turned down for a mortgage after new stress tests are introduced under the Mortgage Market Review (MMR).
Some 44% predicted that considerably more customers will be turned down, against to 34% who said they did not expect stress tests to significantly reduce the number of successful applicants, according to new research from the Intermediary Mortgage Lenders' Association (IMLA), published today.
Lenders are more confident with a large majority saying most mortgage applicants will pass the new stress tests after MMR is implemented in April.
Just 7% of intermediary lenders expect significantly more people will be turned down for a mortgage because of new stress tests, which will examine whether borrowers could afford their repayments in the event of interest rates rising.
Almost three-quarters of lendersare confident that affordability checks won't affect large numbers of borrowers, while the remaining 20% are unsure theIMLA’s Intermediary Lending Outlook said.
Broker confidence in life after MMR is growing, however. In January, 42% said they were not at all worried about the impact of MMR, that figure has now risen to 66%.
The percentage with significant worries has dropped from 12% to 4%.
In contrast, 67% of lenders are currently worried about the impact of MMR – but despite their extra responsibilities under the new rules, no lender has serious concerns.
IMLA executive director Peter Williams said:“The MMR rules on affordability are built on common sense and are not too far removed from how many lenders already approach the issue. Recent experience has shown how important it is to ensure that mortgage borrowers can reasonably manage their commitments, not just now but in the future.
“We are in unfamiliar territory when it comes to current interest rates, so we have to be pragmatic and anticipate the likelihood of change. Falling numbers of arrears and repossessions in recent years show a responsible approach to mortgage approvals, and lenders are working hard to ensure their existing tests meet the full MMR requirements without unfairly disadvantaging consumers.
“Although the regulatory buck will rest with lenders from April 2014 there is still a collective responsibility to put affordability at the heart of the industry. This involves brokers working closely with lenders to help finalise the rules of engagement, while also ensuring that customer expectations are managed and applications suitably vetted.”
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