Oct 17 2014

17th October 2014 - Rolfe East Property Column

“Knock Knock.” “Who’s There?” “Mortgage Demand.” “Go Away!”

The downbeat line trotted out in the media is that the mortgage industry is reporting that the demand for loans is low, down, small, limited - or whatever other negative word is fitting - and that few people are knocking on lenders’ doors for mortgages. This is completely misleading. In fact, no, it’s plain untrue, they’re essentially turning them away and the answer to the title above should be, “Come in!”

The demand is there; the restriction is happening as it is proving too difficult for potential buyers to get the money because the MMR - Mortgage Market Review - python has wound its lending constriction coils around applicants so tightly it is in danger of squeezing the life out of them!

I am aware of a real example of this situation - one of many no doubt at all - as I know someone who is with a well-known bank and has been a customer for many years. His fixed rate came to end and he tried to move to another deal, as you would, and entered the misty world of the MMR affordability test. He has two loans for cars - which are assets - but these can’t be taken into account. If he decided to sell these cars to pay off the loans to realise the assets he’d still have to wait 3 months for a decision. Furthermore, his property investment (a buy-to-let) cannot be factored into MMR either. This is simply penalising real assets of ‘normal people’ who are trying to get loans, how can that be sensible?

No one - with any sense - is saying that there shouldn’t be quizzing about affordability but, as with most things, there is a happy medium to be had – if you pull the bandage too tight you’re eventually going to cut off the blood supply. As has been oft said, especially by me, The Bank are trying to regulate the market too late and acting on old data and in a pythonesque manner; Monty and monetary! The Bank needs to change its heavy handedness on mortgages, the market has calmed and it is back to normal, so please drop the python!

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