Lifestyle quiz to secure a mortgage

Mortgage applicants face tougher questions about their lifestyle, under new rules that take effect on Saturday.

The changes are designed to "hardwire common sense" into the mortgage application process, the Financial Conduct Authority (FCA) said.

Questions from lenders about customers' regular outgoings - including childcare costs and even haircuts - could be included in affordability checks.

Brokers say the changes could lead to delays and rejections of applications.

The Council of Mortgage Lenders (CML) said the transition to the new rules would be smooth, despite it being the biggest change to the mortgage market for more than a decade.

And many lenders have already changed their systems so they comply with the new rules.

'Sensible' move

The rules - known as the Mortgage Market Review (MMR) - are designed to protect consumers from the kind of reckless mortgage lending that would leave them unable to make repayments.

They were drawn up during the financial crisis and originally planned to come into force last summer but changes were made following consultation with lenders.

At their heart is a new affordability check, that will see applicants interviewed by a lender and asked about their income and outgoings.

Martin Wheatley, the chief executive of the FCA, told the BBC: "The core principle is a very sensible one - lend to people what they can afford to repay.

"We've come out of a period, particularly in 2008-09, when there was no attempt to verify people's ability to pay, and we've ended up with lots of payment problems, lots of people in mortgages that are problematic for them, and if we had a different interest rate environment we'd see a lot of foreclosures."

'Stress test'

Previously, many mortgage offers were based on a multiple of the buyer or homeowner's income. Now, more consideration will be given to the household budget and how much spare money is available to them.

That is likely to mean more detailed checks, with questions asked about anything from subscriptions to childcare costs.

Applicants will be expected to explain if they are predicting any significant change in their income or spending.

The rules are aimed at reducing the chance of reckless lending

Lenders will also have to "stress test" an applicant's ability to repay if interest rates increased over a five-year period. This is expected to lead to some applications being rejected.

However, the Building Societies Association (BSA) said this did not mean that those on lower incomes or those only able to offer a small deposit would be frozen out of the property market.

Paul Broadhead, head of mortgage policy at the BSA, said: "It is understandable that people are concerned about the changes to the mortgage application process - however, it is vital that this new regime does not dent consumer confidence or sentiment in the housing market.

"It is highly unlikely that a single purchase or category of expenditure will make the difference between yes or no decisions."

However, mortgage customer Claire Bhandhukravi said that a loan that she had taken out to buy a car had "thrown a spanner in the works" when applying for a mortgage.

"It resulted in me getting less money, and the whole process took even longer," she said.

Peter Hill, the chief executive of the Leeds Building Society, told the BBC that research carried out when the changes were being drawn up indicated that in a normal mortgage market the new rules would probably affect about 2.5% of borrowers.

"In a more buoyant market, possibly a market that's starting to overheat, that could be as much as 11%, so I think the impact's going to be much smaller than some people fear," he added.

Mortgage lenders have had to train staff in the new rules, but the extra pressure on time could mean the process of securing a mortgage to buy a home could take longer.

Ray Boulger, from mortgage advisers John Charcol, told the BBC that while some of the checks were common sense, he thought some were unnecessary.

"When it gets down to asking for detail on non-essential expenditure, which we know in practice that people tend to cut back on if they need to, that's where I think some lenders are going too far - but it does vary considerably from lender to lender."