Financial News

  • 25 April 2014, 13:16

Gym Fees 'Could Stop Mortgage Approvals'

Homebuyers could find themselves turned down for a mortgage because of their gym memberships, phone bills and pension payments, under new rules introduced this weekend, experts have warned.

Mortgage advisers said new restrictions introduced under the Mortgage Market Review (MMR) would drastically increase the intrusiveness of checks undergone by applicants.

The warning coincided with advice from economists, who claim the rules could dampen down activity in the housing market.

The new rules, part of a push to prevent lenders handing out loans to those unable to afford them, will stipulate banks and building societies must inspect customers' spending commitments to ensure they can keep up their monthly payments.

Those commitments might include items as innocuous as informal club memberships, according to Peter Marriott of Westexe Mortgage Solutions.

He said: "They might have a gym membership, they might be contributing to a pension plan - anything that's deemed by a mortgage lender to be a commitment could be held against them as an ongoing expense, which would in turn affect the affordability and the lender's decision on how much they can borrow."

The MMR changes will also mean lenders have to test whether homebuyers will be able to afford their mortgage payments if interest rates rise sharply, to 7% or above.

The Bank of England's Financial Policy Committee has recommended it should be able to change the suggested stress test rate in future, giving it an extra lever to influence house prices.

The changes come amid growing consternation about rising house prices.

According to the Office for National Statistics, house prices across the UK have increased by 9.1% in the past year.

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