How to pass the new mortgage rules
From 26 April, Mortgage Market Review (MMR) rules officially come into force, requiring lenders to be far more diligent about who they lend money to.
The Financial Conduct Authority, which is responsible for the changes, wants to make sure the bad old days of mortgages being handed out willy nilly - sometimes even without proof of a borrower's income - stay firmly in the past.
Here's our checklist of the things you will probably be asked to provide:
* Council tax
* Food (groceries and eating out)
* Petrol and car maintenance
* Mobile phone
* Car insurance
* Buildings and contents insurance
* Pet insurance
* TV Licence
* Student loan
* Gym membership
You'll also be asked for any outstanding balances you have on the following, in addition to your monthly outlay on them:
* Credit cards
* Store cards
* Personal loans
* Furniture loans
* Car loan
The questions are designed to give the bank or building society a comprehensive overview of your spending habits so it can ensure you are able to keep up with your mortgage payments, even if rates rise.
Other things you will be asked to provide:
* Bank statements (up to a year's worth in some cases)
* Your latest P60
* Statements of all outstanding debt (including everything from credit cards to a student loan).
And don't forget…
* Check your credit score and ensure it's accurate. If you find any errors, or your circumstances have changed, ask the credit agency to update it.
* Make sure you are on the electoral role. This makes you look a responsible member of society and lenders like it.
Your credit score is a three-digit number (ranging from a low of 300 to a high of 850) calculated from the information in your credit report. Your credit score enables lenders to determine how much of a credit risk you are. Basically, a low credit score indicates you present a higher risk of defaulting on your debt obligations than someone with a high score. If you have a low credit score, any products you successfully apply for will carry a higher rate of interest commensurate with this risk.
Does exactly what it says on the tin: covers the contents of your home for theft and damage and also may insure certain possessions (jewellery, cycles) outside of the home. Things to watch for include the excess and also the maximum payout on individual items. Another grey area is kitchen fittings, as some contents policies say these are not contents but part of the fabric of the property and covered by buildings insurance and some buildings policies don’t cover them because they regard them as contents.
This is a mutual organisation owned by its members and not by shareholders. These societies offer a range of financial services but have historically concentrated on taking deposits from savers and lending the money to borrowers as mortgages, hence the name. In the mid-1990s many societies “demutualised” and became banks. One academic study (Heffernan, 2003) found demutualised societies’ pricing on deposits and mortgages was more favourable to shareholders than to customers, with the remaining mutual building societies offering consistently better rates. In 1900, there were 2,286 building societies in the UK; in 2011, there are just 51.