Will MMR see an improved demand in the lettings sector
Normally an MMR rumpus is linked to childhood vaccinations but the property industry is deliberating and discussing the effects of its very own MMR crisis.
The end of April saw a raft of new lending rules introduced by the Financial Conduct Authority (FCA) following a three year Mortgage Market Review off the back of the 2007 property market crash.
So why should we be concerned with this in the lettings industry when it pertains to sales, especially given that the rules don't apply to buy-to-let mortgages The MMR and ensuing affordability 'stress tests' could dent a market that's already witnessing many buyers being out-priced, despite Help-to-Buy and low interest rates. Perhaps the more vigorous examination of borrowers' finances will see some prospective purchasers fall at the financial hurdle, taking some of the heat of a rising sales market with them
It's early days but we'd be interested to see if there is a sharp rise in mortgage application refusals as a result of the new rules. The area that should especially concerns lettings is the scrutiny of first-time buyers. Borrowers have been prepared to discuss their utility, loan and credit card outgoings during mortgage interviews, but how many applications will unravel when they lay bare their 'superficial' expenditure - their monthly salon visits and gym membership fees. Interestingly, how many will be refused loans because they plan to invest in property in the future, as a landlord.
And how many will have their home ownership dreams dashed because they want to start a family and whose childcare costs might leave them with no money to pay the mortgage What about the long-term tenant who could easily afford the rent as the landlord hadn't raised it in years but who fails the stress test when the lender applies a 7% rate of mortgage interest to his loan
A blog full of questions, granted, but if the FCA's new rules are adhered to and acted upon, we may well see a new or at least sustained demand in lettings. Time to become best friends with your IFA as they might have the answers to those questions.
* Simon Duce is managing director of the ARPM Group, providing national outsourced lettings and property management services
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