Private banks are imposing tougher rules on mortgage lending, making it trickier for wealthier borrowers to get funding.
Regulatory requirements, introduced via the Mortgage Market Review last year, are forcing banks to put the borrower’s affordability under much greater scrutiny. Subsequently, asset-rich but cash-poor applicants are increasingly finding that they don’t meet these tougher criteria, whereas 12 months ago their mortgage might have been approved without any issues.
Those private banks which are part of a larger banking group are often most susceptible to this as they are more likely to have a ‘one size fits all’ approach. But even some of the smaller private banks have a diktat from the Financial Conduct Authority that they need to have a policy on affordability. They are having difficulty fitting clients into the structure.
Much of the response from some private banks is a kneejerk reaction to the relatively new rules so we expect over time that things will settle down. However, in the meantime borrowers are likely to find it harder to get a mortgage.
In this trickier funding climate, advice is paramount. Borrowers should get organised and look at all their various sources of income. They should pull together statements for any income-generating investments, and consider ongoing income, pension schemes etc.
Borrowers must be on top of their game and have all this information to their fingertips. They have to help the private bank by demonstrating that they can draw income from investments or other sources so that the bank can see evidence of affordability.
To discuss your financing options, please get in touch.