Potential home buyers are financially stress-tested as rules force lenders to crackdown on risky mortgages
Has Help to Buy really made it any easier to get a mortgage? Lenders are now using affordability stress tests based on borrower’s monthly spending and an interest rate of 7%!
Under the new system, lenders are carrying out a thorough “forensic” investigation of a borrower’s finances. They will want to know more details about your day to day finances, including, how much you earn, how much you spend on food and utility bills every month, gym membership, mobile phone contracts and the size of your existing debts.
The new checks are based on the Mortgage Market Review outlined by the regulator, do not officially come into force until 26 April 2014. However, the new rules are already being followed by most of the country’s big lenders as part of a crackdown on risky lending.
The new affordability stress tests will be based on interest rates hitting 7% during the next five years, even though repayments may never reach this level. Potential borrowers will be refused mortgages unless they can demonstrate they will still be able to afford the repayments should interest rates rise.
The UK average family home is now 2% smaller than it was ten years ago.
A recent report from the insurer LV, says the average family home has ‘fundamentally changed’ in recent years as houses have become smaller. The report states the average UK home, including both old and new-build properties, is 85sqm and has 5.2 rooms – with an average area of 16.3sqm per room. In comparison, the average new home in the UK is 76sqm with 4.8 rooms and an average area of just 15.8sqm per room.
The research has revealed that over the last 10 years the average family home has shrunk by two square metres, as more people ‘shoe-horn’ themselves into small new homes and unsuitable flats. The average UK family home is now just 96.8 square metres. The most common type of home for a family in England is still a semi-detached, three-bedroom house, but around one in ten families are now living in flats – a third of all flat-dwellers – and a 20% increase over five years.
John O’Roarke, managing director of LV home insurance says: “The average family home has changed dramatically in the last five years. More families are now living in flats and rented accommodation. Many families are now living with makeshift modifications that could be illegal and also unsafe. Building regulations are designed to ensure that home modifications are safe and we urge all those considering modifying their home to ensure any changes they are planning, meet regulation standards.”
A Consistent Approach To Failure?
Have you ever heard the phrase “within tolerance”? If you are a new home buyer the chances are it will have been said by a housebuilder’s representative using an industry-agreed degree of tolerance to dismiss your complaint of poor quality and justify an aspect the finish of your new home as acceptable and “within tolerance”.
The NHBC’s publication “A Consistent Approach to Finishes” was originally written for its inspection and a claim staff and was distributed to house builders in Spring 2000. It was also made available to homeowners who were in dispute with their house builder.
“A Consistent Approach to Finishes” set out to formally publish guidelines that could be used to settle disputes with disgruntled new home buyers, especially useful and often quoted and used by housebuilders when any remedial action would be messy, very expensive, inconvenient and time consuming to carry out!
These tolerances are now contained in Part 1 General Information of NHBC Standards – Chapter 1.2.
The NHBC state that:
“many sources of information relating to tolerances and finishes have been reviewed in the preparation of this Chapter. The tolerances and finishes given here are considered to be appropriate for the house-building industry and take precedence over other recommendations. This Chapter is not intended to deal with every situation that may arise and discretion should be exercised in its application in specific circumstances. The nature and extent of work necessary to remedy minor variations from the tolerance and finishes given should be proportionate and appropriate to the circumstances.”
Here are a few of the tolerances stated in the NHBC’s “A Consistent Approach To Finishes”:-
Against expert advice and clear objections from the Environment Agency, local authorities across the country are giving developers planning permission to build new homes on flood plains. In England alone, around 197 developments have been approved on flood plains since 2002 against the advice of the Environment Agency. Around 200,000 homes built on flood plains in the UK, with 38,000 new homes having been built are in areas regarded as high-risk – in other words likely to be flooded.
Even if new homes being built on flood plains are raised above anticipated flood levels, the floodwater will just be channelled elsewhere, perhaps to areas that would have otherwise escaped flooding.
Can new home buyers really believe what the house builders claim on their websites and in their marketing material? A quote from Taylor Wimpey’s own website claims:
“The standard of home building in the UK has never been higher than it is today” “We’re dedicated to building quality new homes. It’s the core of our business, which means that we know a thing or two about it.”
I don’t believe it!
Even Victor Meldrew would have trouble with this defect!
If this really is the case, how could a defect like this happen?
Even worse, why was it not seen by anyone and corrected prior to legal completion?
“Every team has a dedicated Site Manager, who is responsible for making sure that your home is built to the highest possible standard.”
So how and why did this happen?
This defect was created at the first-fix stage. The door frame should have been packed off the wall nib using a timber stud to ensure the light switch would fit between the architraves later on. The light switch may even have been fitted in the wrong position altogether, at the very least the electrician should have noticed there could be an issue during his second-fix. The “dedicated site manager” didn’t check this stage of the build presumably!