APR 2015 – How will the withdrawal of certain transitionals impact consumers?

Will the withdrawal of the transitional rules for remortgage borrowers switching lenders make any real difference to consumers or the level of business which this allowance facilitated, given the reluctance of lenders to use the rules?

It has been a source of extreme frustration that very few lenders have chosen to apply the transitional provisions allowed under the MMR rules.  Every broker in the UK has examples of customers who have been reliable mortgage payers, no blemishes on their credit file, but struggle to obtain a remortgage or even get a new deal from their existing lender.

This is often because they are self-employed and previously self-certified, or now have credit scores below the new higher thresholds being applied and their lender sees them as having difficulty in moving.  The transitional provisions that avoid the need for full credit assessment should help these people and are still fully available until 26 March 2016.

The loss of the facility for those changing lenders will make little difference, based upon usage by the larger lenders to date.  There has been some good progress from smaller lenders but the big boys should hang their heads in shame at their failure to use these provisions for all existing customers, never mind new.  However it should be seen by all, and the consumer press in particular, as an issue liable to cause significant harm once prevailing rates start to increase.  This might happen sooner than people think as mortgage rates are not linked to base rates, and a precarious majority in the next Parliament may cause market rates to rise sharply.