What do you get when you put a group of FSA (now FCA) monkeys in a room and ask them to solve the world's problems? The MMR! Not measles, mumps and rubella… the Mortgage Market Review, the knee jerk reaction and supposed solution to the financial crisis.
It doesn't apply to buy-to-let…yet!
It started on Saturday and will be with us for some time yet. I am critical about the MMR even though, at this stage it doesn't apply to buy-to-let. The problem with these type of reviews is that bureaucrats tend to expand these things. So watch out for this happening.
It's all about disposable income…
The big impact it will have is on those whose income and lifestyle mean they have limited disposable income, they will struggle to get lending.
Beware if you don't already have a home…
If you haven't got a home right now you may struggle to invest in a buy-to-let property. Some lender's attitude (stupidly) is that if you haven't got a home why would you buy a buy to let property so they will simply not accept your application.
What the experts say about the Mortgage Market Review
Speaking with my contacts in the mortgage industry they all agree on a few things. Many banks have already implemented it in what appears to be a massively overdone fashion. This will add massive workload to all banks and brokers and mean that the next three to six months will involve huge backlogs of work. Secondly, they all think that things will change and calm down once they realise they are stifling the market and that it's really not necessary, but this could take six months or more.
Many people are saying that one of the ways around some of the effects of the Mortgage Market Review is to cut all expenditure three months before you make a mortgage application. Good for some, but realistically it probably won't make much difference. Plus, the whole idea is to take into account true affordability then telling someone to change for three months is tantamount to mis-selling.
So be prepared for longer and more detailed mortgage applications which will take longer and let negotiation on the costs of using a broker.
Also, if you want advice on the best course of action them speak with the team at buy-to-let mortgage people on +44 (0)207 923 6100 and they can refer you to the most appropriate.
Live with passion and fun,
P.S – and if this wasn't enough, the real monkeys at the European Commission will be further complicating things with their European Credit Directive.