Mortgage borrowers now face tougher questions on finances

 
Tim Wallace
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HOME buyers will have to show they can cope with a rise in interest rates when applying for a mortgage, under new rules introduced over the weekend.

The City watchdog hopes households will be protected from losing their homes if interest rates rise, and lenders will only give out higher quality loans.

Self-certified loans are banned as lenders must check borrowers’ incomes, and buyers will have to show a plan to repay interest-only mortgages in full.

But the mortgage market review (MMR) rules could also be a shock for households already struggling to afford the large deposits required for expensive London homes.

MORTGAGE CHANGES
■ Banks and building societies will have to make sure borrowers can afford their loans even when interest rates rise.

■ They will study households’ income and outgoing to build up a picture of what they can afford.

■ And they will compare that with the cost of mortgage repayments at a range of interest rates over a five-year period.

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