Mortgage affordability rules could change. Home owners switching to cheaper mortgage deals are soon likely to be able to do so more easily.
The Financial Conduct Authority has proposed that lenders should carry out a more “proportionate” affordability check for those looking to change mortgage deal.
Those who have kept up to date with their mortgage payments and who aren’t looking to borrow more are likely to soon have more ‘relaxed’ affordability checks. This means they could move to a better rate mortgage once their fixed rate is up, saving money on repayments.
Money Saving Expert Martin Lewis has been campaigning for this for years. Some people are trapped in expensive rate deals due to high affordability requirements and cannot move to a cheaper deal.
The current strong affordability checks mean that some people who are looking to remortgage can’t move to a better deal. Even if they have kept up on repayments and never defaulted, lenders can sometimes calculate that they cannot afford to move deal.
This news is not likely to affect first time buyer mortgages. Rigorous checks are always going to be needed to ensure they can afford the mortgage repayments.
The FCA say some people will not be able to benefit from these new rulings. This includes:
The FCA also announced that lenders should make it easier for people to switch mortgage deals. At the moment many are staying in the same deal which could cost them more in the long run.
The FCA say that they will be looking at working with the lenders to make things easier in the future.
These guidelines are currently in the proposal stage. Nothing is confirmed at this stage.
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