This month Taj discusses the second wave of regulations that went live from the 1st October. He starts with looking at a Statement from the Council of Mortgage Lenders which said mortgage approvals are slowing down, and speculated that this would have a knock on effect on house prices. Taj puts this down to the effect of the new regulations. If you are applying for a mortgage today, the lender will assess you as if the rate was 3% higher than it is to ensure you can afford the repayments if rates increase. This is bad news for contractors working via a limited company, as often large amounts of income are ignored during affordability testing.
Taj advises contractors to be careful when approaching lenders directly, and to make sure applications are assessed in the correct way using bespoke underwriting which specialist brokers offer. The other issue discussed was about lending targets. There has been a slow down in lending due to the new regulations. This has led to lower rates but these are likely to be pulled at short notice when targets have been hit.