Pitt: Lenders could use MMR loophole

His latest commentary, the second looking at a different angle on MMR, focuses on contracts when switching a mortgage in several years’ time.

Pitt explained: “The transitional arrangements allow lenders to product switch, if the existing mortgage was in existence before the 26th April 2014, without applying the new affordability and interest-only rules.

“However, that will only apply when there is no additional borrowing taking place, other than to finance product or arrangement fees, and there are no material changes to the contract.

“Conversely, not considering affordability when a term extension takes the borrower into retirement or when a mortgage is being converted from repayment to interest-only could be seen as contravening the assessment rules.

When discussing his commentary of the Mortgage Market Review, Pitt added: “MMR isn’t a one hit wonder and there’s going to be an effect on everybody going forward.”