Last year, the government attempted to impose tighter regulations on the property market, giving lenders stricter guidelines about checks they would have to make before they approved a house purchase loan for someone looking to buy a house for sale. No longer would it be simply down to household earnings, with lifestyle, leisure spending and all other outgoings under scrutiny.
It meant that it became harder for people to be able to get themselves a loan that would get them onto the housing ladder, with many being rejected over things that would have gone completely unnoticed in the past.
Since the Mortgage Market Review, gross lending has increased across the UK. However, this is more to do with the fact that the average size of a mortgage has increased as house prices have continued to grow. According to recent figures from Paragon Mortgages, the reality is that the volume of loans has decreased in the 12 months since the review took place.
According to the findings, 43 per cent of lenders said there had been very little movement in the volume of mortgages that they had managed to approve over the course of the last year. However, another 24 per cent added that they had seen a fall in overall volume of mortgages during the same period.
If you are one of the many who are now struggling to find themselves a mortgage to buy a home, how are you planning to go about making your dream of ownership a reality? According to comparison site MoneySuperMarket, many are planning to do so with changes to their spending habits, which could make them more favourable to banks and other lenders.
"Since the new mortgage lending rules came into play a year ago, those looking to remortgage, existing borrowers who are moving home and looking for a new deal and first time buyers will have been subject to their lender looking more closely, almost forensically, at their monthly outgoings," said Kevin Mountford, head of banking at the site.
"While the rules were introduced for the right reasons, in some cases borrowers who can easily afford a mortgage are being turned down for arbitrary reasons, despite them being able to easily afford mortgage repayments," he added.
Spend less, save more
The primary tactic we expect to see more people using moving forward is simple - spend less money. With spending now under scrutiny, buyers are acutely aware that what they spend from their disposable income can be a deciding factor in the decision, and many are looking to reduce their outgoings to compensate.
MoneySuperMarket reports that 25 per cent of people planning to apply for a mortgage are aiming to reduce their spending. The average amount that people are looking to save is £159 per household per month. Having this money stay in the bank rather than going on luxuries and non-essentials will more than likely have an impact on lenders' decision making.
Another tactic that MoneySuperMarket said could be seen more and more often across the country will be people looking to turn towards their credit cards rather than debit cards. The comparison site said some 21 per cent of people are looking to do this in the next 12 months.
The reason for this tactic is that many believe it could leave their bank account with a more consistent and healthier balance throughout the month. If they use their credit card for general spending, they will then be able to clear the balance at the end of each month, which also has the added bonus of allowing them to improve their credit rating, which can only make them a more attractive prospect in the eyes of lenders.
Use cash as an alternative
One more unconventional tactic that MoneySuperMarket is reporting as a possibility for buyers is using cash rather than cards to pay for everything they can, which leaves a reduced paper trail. Some 20 per cent told the website that they believe this will be a good tactic for them moving forward.
What it means is when someone is spending on luxuries, they will take money out of their account and pay in cash. The reason is that when a lender goes over their outgoings with a fine toothcomb, they will have less grounds for a rejection, with fewer records of frivolous spending and luxury items being purchased.
Whatever tactic you choose to use in order to make yourself a more viable option for lenders, the important thing to remember is that you are always best to make sure you are debt free before you apply. Whether it's an overdraft, loan or credit cards, having nothing in the red can mean you are seen as a lower risk customer, far more likely to be given the green light to get on the housing ladder.
Are you looking to get onto the property market in London? We believe that buyers should be able to find their dream home without all of the hassle that can come with buying. To find out how we can help, visit our buyers' page or call 0203 355 0819.
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