Banks are taking into consideration the increases in the cost of living as part of their lending criteria, making it even harder for first time buyers to get a mortgage.
Increasing energy bills, the national insurance rise and a big increase in the cost of household goods are prompting banks to tighten their mortgage affordability tests making it more difficult for consumers to borrow.
Most banks use the household spending figures from the Office for National Statistics (ONS) to judge a borrower’s spending to see if borrowers can afford their monthly mortgage after bills and expenses. However, this ONS data is set to include higher energy costs, with the result that some people might not be allowed to borrow as much in the coming months.
In addition, Banks are implementing more stringent “stress tests” on lending as interest rates increase. They want to check if borrowers can afford a standard variable rate of plus 3%.
The other implication of these increase is that it will put pressure on house prices. The suggestion is that it will lower house price increases to below inflation although this is still unlikely to offset affordability criteria.
Ali Mitchell, director of IFA RobMac and their independent mortgage adviser says “While increasing costs and more stringent tests will be a factor going forward, it mainly applies to the main banks and high street lenders.
One of the benefits of a being an independent mortgage adviser, is that we can go to the whole of the market. We can still find lenders who are prepared to offer mortgages to first time buyers that they can afford.
Independent lenders tend to take a more pragmatic approach and make their calculations on an individual basis rather than a computer calculation. We’ve found this of particular benefit to self-employed customers who are looking to buy property.
We’ve developed an expertise in finding mortgage solutions for people whose circumstances are not straightforward and who would never qualify from the main lenders. There are definitely solutions out there for nearly everybody; we just have to look for them.”
If any of the above is of interest to you and you would like to discuss your mortgage further, you can arrange to meet online with one of our financial advisers. You can call us on 0131 226 6700.
