The MMR vaccine

No, this is nothing to do with Measles, Mumps and Rubella, it is how to prepare yourself for getting your next mortgage (which may also be your first).

Some 72% of aspiring home buyers do not know what the MMR is; of those that do, most are ill-informed, believing it means smaller deposits and relaxed lending criteria.

Three quarters of aspiring home buyers in the UK do not know what the Government’s Mortgage Market Review (MMR) is, according to a survey commissioned by Experian, the global information services company.

Furthermore, among the 28% that claim to know what the program is, many are confused or ill-informed as to what these new affordability measures could mean for their property dreams.

• 43% think the introduction of the MMR means they can apply with smaller deposits – when larger deposits to make mortgage repayments more manageable, are likely to be needed;

• 19% believe lenders will have relaxed their lending criteria after April 26, 2014 – when affordability checks will in fact become much more stringent;

• Only 44% of these respondents correctly understand that it means lenders will be more careful about ensuring that mortgage applicants can afford their repayments, both now and into the future;

• Just 15% are rightly aware they will need to speak with an adviser before getting a mortgage;

• 55% of respondents feel more confident about getting a mortgage following its introduction – yet other findings from the Experian report suggest this confidence may be misplaced.

Introduced from April 26 2014, the MMR aims to make mortgage lending more responsible and stable. However, it does mean that those hoping to borrow to purchase a property will need to show they have considered how they will be able to manage their repayments in the long term - for example, in the event of an interest rate rise.

Affordability

Despite the MMR’s emphasis on affordability, a quarter of all would-be buyers surveyed admit they currently find it difficult to budget each month.

• Half (49%) confessed to overspending in the last month;

• A third had to dip into their overdraft last month – 8% heavily;

• One in seven (14%) say they are unable to cut back outgoings any further.

Preparation is Key

In order to stand the best chance of securing a mortgage – and to get one with the best interest rate – home buyers need to get their finances in the best possible shape. However, it appears very few potential buyers are doing that.

19% don’t plan on preparing their finances before their mortgage application, whilst 18% only plan on preparing a month prior to their application.

Moreover, fewer than one in four (23%) have checked their credit score in the last six months, which would help provide a clear picture of their financial situation and how they are likely to be viewed by lenders.

Of those looking to buy a property:

• Only a fifth plan to make a clear six-month budget;

• A quarter plan to clear outstanding debt;

• A further 15% plan to pay down any outstanding credit;

• Only a third plan on cutting back on luxuries in the lead up to their application.

Peter Turner, managing director, Experian Consumer Services, UK & Ireland, said: “Although none of us have the luxury of a crystal ball to see into the future, understanding how much we can really afford to borrow - and crucially, repay - even if our circumstances change, is so important for any credit application."

“Time spent preparing your finances now will pay dividends in the future. We’d advise potential homebuyers to look at their financial situation as soon as they make the decision to look for a home, and not just before they apply for a mortgage.”

“This will give you the chance to make any improvements necessary and get accepted - and at the best rates, too.”

“Simple steps like increasing your monthly credit card repayments, ensuring you’re registered on the Electoral Roll and not taking on additional borrowing can make a real difference to how lenders see your ability to afford and manage a mortgage. But it does take time to build a clear, consistent track record of positive money management.”

So, to use medical terminology, make sure you get vaccinated against MMR by talking to your independent mortgage broker, who will be able to advise you on the best way of preparing your finances, well in advance of applying for a mortgage.