Mortgages  

Stress tests will see mortgage rejections rise: poll

Responding to the introduction of the tests as part of the mortgage market review, a survey of more than 300 mortgage intermediaries by the Intermediary Mortgage Lenders Association, revealed that 44 per cent of members felt that more consumers would be turned down, compared to 34 per cent who expected no change in approvals.

Under new MMR rules - to be introduced next April – responsibility for affordability checks officially pass from brokers to lenders, while new stress tests will examine whether borrowers can afford repayments should interest rates rise.

However, despite scepticism by brokers over the stress tests, the research did reveal that 66 per cent were “not at all worried” about the MMR, compared with 42 per cent in January.

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An additional poll of senior representatives of 16 Imla members, drawn from banks, building societies and specialist lenders, revealed that 73 per cent were confident the checks would not affect borrowers.

Peter Williams, executive director of the Imla, 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.”

Adviser View

Jane King, principal of London-based Ash Ridge Asset Management, said: “I am inclined to agree that the stress tests will mean an increase in rejections. Lenders are already tweaking their criteria in advance of the MMR, and I think it will be a gradual tightening of rules, as lenders become cautious, which is obviously a bad thing given the recent resurgence in the market, but they are very conscious of litigation regarding affordability.”