MMR: Up to 17% of mortgages would have been banned in the boom

19 December 2011 | By Samuel Dale

In its final MMR consultation paper published today the FSA estimates its responsible lending proposals would have affected between 7.8% and 17% of mortgages prior to the credit crunch.

Its central estimate is that 11.3% would have been banned in the boom while 2.5% would have been affected in a subdued market.

The figures reveal the cumulative impact of stricter affordability assessments, interest rate stress tests and interest-only proposals.

A total of 69.7% of credit-impaired customers would have been unable to mortgage in the boom, almost a third of self-cert deals and one in five interest-only sales.

Furthermore one in 10 first-time buyer deals, remortgages and home movers would also have been prevented.

Almost one in five self-employed borrowers would have been affected by the proposals and 7.6% of fast-track deals would have been banned.

In a subdued period one in 10 credit-impaired, interest-only and self-cert deals would still be banned under MMR rule changes.

The MMR states that the incremental impact of the interest rate stress test and interest-only proposals together, 2.5% in subdued, 7.7 % in boom, is greater than the sum of their individual incremental impacts, 1.8% in subdued, 6.6% in boom.

It states: “This is due to the interest-only and interest rate stress tests proposals acting together to affect borrowers who would not be affected by either of the two proposals alone.

“For example, an interest-only borrower may pass an affordability assessment with the interest rate stress test, and may also pass an affordability assessment with the interest-only proposals, but not pass an affordability assessment where both the interest rate stress test and the interest-only proposals are applied.”

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