The new rules of mortgage lending has had an impact on the property market in the UK

New testing rules for mortgage lending, which came into force on April 24, 2014, has already had its effect on the housing market.

According to information provided by the Agency of Chartered surveyors Connells, March 2014 was weaker than expected. The number of evaluations of real estate fell in March compared with February, 9 %. Usually March is a very strong month in the real estate market, but this year has been no exception.

The reason for this is changes in the rules of mortgage lending. Lenders needed more time and resources to prepare for a new way of examining applications for loans, in the end, dramatically decreased the number of completed transactions.

However, this is only a technical hitch and for 2014 it is expected a significant increase in the number of transactions in the process of adaptation to the new rules.

The essence of the new lending rules that in considering an application for a mortgage loan, the borrower will be asked to more carefully assess their costs, not only today but in all the years during which he will have to repay the loan. For example, the borrower will have to take into account spending all of your expensive Hobbies, entertainment, for example, hunting or fitness club, as well as its peculiarities in the diet. In addition, borrowers are asked to assess their creditworthiness in case, if the rate of the Bank of England will increase over the coming years – will they be able to repay the loan at the increased rates?

As is known, the former structure of mortgage lending has become one of the causes of the financial crisis and exacerbated it.

In this regard, has developed new rules that are designed to eliminate the risks for both parties. The basis of the rules lay a simple goal – to focus on the responsibility of the borrower to the lender and to the borrower to be able to feel responsibility.

The availability of mortgages improving, this is due, primarily, historically low interest rates of the Bank of England, as well as with significant reduction of the initial fee that must be paid to the borrower. This is especially felt by those Brits who were able to take advantage of the government program “helptobuy”, whereby the borrower to obtain a mortgage loan you will need to make only 5% of the cost of housing, 20% will make the state and the remaining 75% of the borrower will be issued on the terms of mortgage lending.

® Alice Morgan 25.04.2014

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