I’m sure that many of you will have seen or heard the mortgage related news stories that have been bombarding the media lately.
Yes that’s right, the already overly-confusing mortgage application process has just been made even more complex. According to the Financial Conduct Authority (FCA), these changes have been designed to “hardwire common sense” into the whole process.
This couldn’t have come at a worse time for me. I had just decided that it might be time to start thinking of myself as a (dare I say it) “grown-up” and get my head around the mind-boggling labyrinth of APRs, LTVs, and goodness knows how many other acronyms, and then just like that they change the rules.
I’ll be honest, although these changes make it much more difficult for young first-time buyers like myself to have our first mortgage approved, I can definitely understand the logic behind them. Yes, you might have enough money to cover the cost of the mortgage repayments, but does that mean you can actually afford it? Once you take into account that big monthly girls’ night out (including the new dress that you have to have, all the alcohol you will no doubt drink, and the takeaway on the way home), as well as those DVDs you ‘just picked up’ in your weekly shop, and those new running trainers because “I really am going to start it for real this month”, do you still have that money left to pay for the mortgage? I’d like to think I wouldn’t fall into the bracket of people who could get into trouble because of spending like this, but a part of me worries that might not be true.
I decided to see who else could have those tiny yet un-ignorable voices in their head trying to keep tabs on their spending habits every month. Would anyone else be worried about stumbling at these new obstacles the government has put in the way for first-time buyers?
You could now be asked how much you spend on up to 20 different items or activities: eating out, socialising, hotels, alcohol, cigarettes, TV and internet subscriptions, mobile phones, gym memberships, essential and non-essential travel, parking, clothing and footwear, haircuts, personal grooming, cleaning products, dry cleaning, pets, dental care, eye care, childcare, and groceries. Wow.
It seems that the area that people might be most worried about is their TV and internet subscriptions, with 20% claiming their spend could cause a problem if they were to apply for a mortgage now. Next on the ‘worry-list’ is the amount spent on groceries (17%), followed by cigarettes (15%), travel (14%), eating out (13%), alcohol (12%), socialising (11%) and mobile phones (11%).
The big question is this: how much of this additional spend is the British public willing to sacrifice for the privilege of owning a property? At what point do you decide that it’s time to say goodbye to the Sky Sports package so that you can get the official nod on your application? Should the government even be able to pry on your spending habits in this way?
If the purpose of these new changes was to confuse me, it’s worked. If the purpose was to make me scrutinise my spending habits, it’s worked. I guess either way, I’m thinking more about the money that I have and how I’m spending it. That can’t be a bad thing for mortgage lenders. Judging by the results of this poll, it might not be a bad thing for anyone – mortgage applicant or not.
Bethan Turner is a senior research executive at Mustard, and is more than happy to hear any feedback (or take any financial advice!) on Twitter @MustardBethan.
These results are based on an online poll with Toluna of 1,524 people.