New mortgage lifestyle quiz - what to expect

By Christine Farrell

Since 26th April mortgage applicants in Northern Ireland and the rest of the UK have been facing a much more extensive questioning process in order to assess their ability to afford a potential new mortgage.

Dubbed the 'lifestyle quiz', and likened to the 'Spanish inquisition' because of the intimate nature of some of the questions applicants have been asked, the new interview process takes up to 3 hours. So what is the new 'lifestyle quiz' and what should new mortgage applicants expect?

'Lifestyle quiz'

The new rules are officially known as the Mortgage Market Review (MMR) and they were drawn up during the financial crisis to reform the mortgage lending application process and eradicate the 'reckless lending' culture which was deemed to have caused so much damage during the recession. The new questions were created to "hardwire common sense" into the mortgage process, and essentially are designed as a new affordability check.

Previous mortgage application questions created a fairly static snapshot of an applicants financial status and assessed their ability in that moment to afford the mortgage they were requesting. The new quiz includes stress tests that attempt to map the possible evolution of a person's financial situation, and to also factor in potential changes such as interest rate increases.


What to expect

Mortgage applicants will still be asked about the standard incomings and outgoings such as the cost of child care, food, transport, travel, pension payments and utility bills.

The new questions will explore those costs further, and so for example, with regard to the weekly grocery bill, one recent mortgage applicant has said that they were asked how often they cooked steak in the house.

Your shopping habits will also be examined more closely to get a more complete picture of your outgoings. How often you go out shopping to a local outlet or Mall, how much you would spend on average on each visit. You will also be asked about any regular subscriptions such as magazines, gym memberships, and online commitments such as Netflix etc. Female applicants have also said they have been asked about the cost of their hair cuts, and how often they have beauty treatments.

The new questions are designed to add up all the smaller expenses that you might not consider part of your regular outgoings, but another important element is the attempt to assess how those expenses might change in the near future.


Plans for the future

Applicants who have gone though the new 'lifestyle quiz' have been surprised at some of the questions they have been asked about their plans for the future. Childcare costs are often the largest outgoing so it is not surprising that lenders are keen to know about the mortgage applicant's plans in this regard. Is a newly married couple thinking about starting a family soon? Or is an existing family thinking about having another child?

From a mortgage lender's point of view changes to size of the family can have a significant impact on the amount of disposable income an applicant will have each month to meet their monthly mortgage payments - reduced salary if one of the parents will take extended leave, or the additional cost of childcare so that both parents can return to work, not to mention the additional expenses associated with a new baby.

Mortgage applicants will also be questioned about other possible changes in the near future. Is a promotion or pay increase on the cards? Is there are any other significant change on the horizons that might have an impact, for better or worse, on your finances?

While the new questions may seem invasive or exhaustive, they should help build a very accurate picture in respect of your ability to afford a mortgage. Providing common sense prevails they should prove a useful layer of protection for anyone considering taking on a new mortgage.


Some tips

To avoid the risk of being excluded from the better mortgage deals it is important to make sure your finances are as in good a health as possible, and not just in the week before your meeting to discuss your mortgage application. You need to plan ahead and have any changes in place a few months before your application is lodged so there is sufficient evidence of your new financial health.

Scrutinise every direct debit and subscription. Are you still a member of that gym you never go to? - if so get it cancelled. Have you reviewed your mobile contract or cable television package recently? Could you be getting a better deal, or are you perhaps on an elaborate package that you could reduce? Could you reduce your grocery bill by shopping elsewhere? Cut or reduce subscriptions were possible and shop around for better prices on your other outgoings. These measures will not only save you money but they'll also put you on a better footing when applying for a mortgage.

Finally, be open and honest during your mortgage application. Of course you are keen to get approved, but you don't want to be overstretched - answer all questions truthfully and you should arrive at a mortgage commitment that works for you.


If you are buying, selling or remortgaging a property in Northern Ireland, and require a conveyancing solicitor to handle the legal process for you, contact Wilson Nesbitt in Belfast by calling 0800 840 9290.