Borrowers alter spending habits to beat MMR rules

The comparison site found that a fifth (20%) of those looking to apply for a mortgage in the next 3 years are planning to use cash more frequently to hide exactly what they spend their money on from a prospective lender, while 21% will pay for more items on their credit card and then clear the balance at the end of each month so they can maintain a healthier balance in their current account.

Spend-conscious borrowers also plan to rein in their monthly spend by an average of £159 by cutting back on non-essential items so as not to appear frivolous with their money. And a third of savvy borrowers (29%) intend to pay off all debts in the lead up to their mortgage application. However, nearly one in 10 (8%) had never even heard of the new MMR rules.

Kevin Mountford, head of banking at MoneySuperMarket, said:

“Since the new mortgage lending rules came into play a year ago, those looking to remortgage, existing borrowers who are moving home and looking for a new deal and first time buyers will have been subject to their lender looking more closely – almost forensically – at their monthly outgoings. While the rules were introduced for the right reasons, in some cases borrowers who can easily afford a mortgage are being turned down for arbitrary reasons, despite them being able to easily afford mortgage repayments. While we wouldn’t want to see the ease of approval going back to the pre-credit crunch levels, it is clear than some consumers have changed their spending habits in order to pass the tests, so may be trying to paint a picture that is far from the reality just to satisfy the requirements."