MMR Take the Stress out of "Stress Testing"


Since the Financial Conduct Authority unveiled its new rules following the Mortgage Market Review, mortgage affordability has been well and truly under the spotlight. As a result of the review, lenders have placed borrowers under increased scrutiny introducing more intrusive assessments and more in-depth "stress testing" of affordability. This has left some either frustrated or disappointed, but don't despair there are some evasive manoeuvres which should help you stay out of the firing line.


Check what you're spending

Before letting a lender see your finances examine them closely yourself. Lenders will want to know what your future spending will look like and the first indication of that is regular expenses.


Cut back your expenses

Consider any regular expenses you could cut back on. Although commitments such as pension contributions or childcare costs could affect your approval, ultimately these are outgoings that you probably can't reduce. Instead think about the last time you visited the gym or whether you are really using all of your unlimited texts.


Moderate your lifestyle

It's worth planning to moderate your nights out or any extravagant extras a few months before you plan to apply for a mortgage. Payments to wine companies or belonging to a local golf club could be seen as living an expensive lifestyle.


Know what you can afford

There are plenty of online mortgage calculators that can show you how much monthly repayments will be on different interest rates. Also, consider projecting how much a rate increase of 1, 2, or even 3 per cent could affect your future finances. Stress testing yourself could be a helpful tool: if it looks close to you it will certainly look borderline to a lender.


Check your credit report

Contact Experian and Equifax to ensure that information they hold on you is accurate and up-to-date and get them to correct any incorrect data.