So the final implementation of the mortgage market review has arrived and , oh goodness are we going to see some big cats amongst the pigeons !
The latest change in the way lenders will be able to offer mortgages has arrived. This version has come about because its claimed that too much money was lent to people who shouldn’t have a mortgage because they can’t afford to pay it back.
Fair enough if the lenders have been naughty and were selling stuff that they shouldn’t have then, as happens almost monthly now, they should have their wings clipped.
However, for some reason when it comes to mortgages it seems that the borrower is always the one that gets controlled and treated like a child.

Old Rules
The old regime pretty much relied on the rule of thumb that if you were able to demonstrate a good credit record and commitments were paid on time then you could borrow between 3.5 and 5 times your salary. Quite simple. All loans were taken into consideration and usually, the more commitments you had the more it would lower your borrowing capability. The fact is, it worked. It only got a bit crazy with the self cert stuff and there may be some problems with that. I can’t find any figures for mortgages that were lent on a self cert basis but I bet in percentage terms it would be quite small compared to a regulated offer. Self cert has not been available since 2009 anyway.

New Rules
Now the new rules are very different because your borrowing capability is going to be based on your lifestyle and will not only take the above into consideration but also what you spend your disposable income on.

The lenders will be scrutinising bank statements

Oh boy will they. They will want to know about your lifestyle and what you spend your money on. “You’re spending £75 on gym membership madam, your Sky is £99 and includes movies and sports, Do you need both?” Or how about a couple with no children? ” I see you have no children, will that be changing in the future?”
Planning kids
As I understand it, the banks will be using software and “sophisticated algorithm’s to work out if it is worth lending to someone. So again we find ourselves in the situation where the ability to make rational decisions is removed by those who claim they know better.
These will be the same people that gave us the worst financial crisis since the Wall Street Crash, sold PPI, rigged LIBOR and all the other stuff that they get fined for on a regular basis.

Now of course it may absolutely turn out fine, but I’m trying to remember, as I write, the last time the housing market went belly up. Was it 1991? when interest rates went up to 11% because we got thrown out of the ERM. People lost their homes because they could not afford to pay a mortgage at those interest rates. Other than that I’m really struggling.
Of course, now they are saying that if interest rates went up then know one will be able to pay there mortgages. But again, this was another crisis built on the greed of banks swapping rubbish debt between themselves! You couldn’t make it up. Is the unintended consequence of these new rules that mortgages will disappear again and the recovery that has got underway skids to a halt.

So why am I blogging about this?
Well, a steady economy is peaceful. People buy, people sell. There are fantastic opportunities for those who want to grab them and we all generally jog along very nicely. The fact is, a healthy economy is good for retail. We sell our furniture , lights and mirrors to those who want them and enjoy doing this immensely. A healthy and steady housing market is good for everyone.