Lender introduces MMR ‘transitional rule’ applications

Lender introduces MMR ‘transitional rule’ applications

The Melton Building Society will now consider mortgage applications from borrowers under the Mortgage Market Review transitional arrangements rules in response to demand from borrowers who have become trapped on their current mortgage deal.

Lenders have come in for widespread criticism for leaving a number of particularly older borrowers stranded or facing hefty fees after refusing tough new affordability tests despite MMR transitional rules meaning existing homeowners not increasing their loan are exempt.

Initially, applications will only be considered through the Melton’s partnership with SBG Group via Sesame Bankhall Mortgage Processing. All mortgage products within the society’s range are available for applications under MMR transitional rules.

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Nigel Stockton, financial services director at Countrywide, previously told FTAdviser that product transfers will take central stage this year, as transitional arrangements remain a key area of concern for the industry and regulators.

Martin Reason, the Melton’s chief executive, stated: “We believe it is our responsibility to give existing borrowers who have a good payment record and no change of circumstances a choice of competitive mortgage products.

“As a mutual which takes a personal approach to lending we are best positioned to help these mortgage prisoners who may otherwise struggle with machine generated affordability tests.”

In order for an application to be considered, it must be a prime residential mortgage on the capital and interest repayment method, with a maximum loan to value of 60 per cent.

Additional criteria include: pound for pound lending only (no additional borrowing or addition of fees), with a minimum loan £100,000 and maximum loan £350,000.

New mortgage rate and monthly payments must be the same or lower than the current mortgage, existing mortgages must have been held for a minimum of three years with no arrears at any time, borrowers must have a clean credit history with no adverse credit permitted, and the new mortgage must be in the best interest of the borrower.

The Financial Conduct Authority has become increasingly vocal about lenders failing to apply transitional rules agreed with lenders, which do not require tougher affordability assessments to be applied where existing borrowers are not increasing their borrowing.

Elsewhere, the Intermediary Mortgage Lenders Association has complained that the MMR generally disenfranchises older borrowers who are finding it extremely difficult to secure loans which end beyond their retirement date.