One of the first questions you’re likely to have when looking for a mortgage is: “how much can I borrow?”
In recent years, many lenders have moved towards an “affordability” based calculation. This considers your income and outgoings to determine whether the loan is likely to be affordable to you now, in the future, and if interest rates were to rise.
However, many lenders still provide guidance on how much they will lend based on a multiple of your income. Read on to find out how we can help you to find a lender who will agree the size of mortgage you need, and how Halifax has relaxed its rules on how much it will lend to wealthier homebuyers.
Gap between house prices and income has widened in recent years
In recent months, UK house prices have soared. Indeed, according to Nationwide, the average house price in the UK is now more than quarter of a million pounds for the first time in history.
Nationwide said its House Price Index found the average price of a property in Britain now stood at £250,311, up 0.7% in October and 9.9% on an annual basis. The price of a typical UK home is now more than £30,000 higher than it was when the pandemic struck in March 2020.
What this also means is that the gap between house prices and incomes has widened. Triggered by the chancellor’s Stamp Duty holiday and many people reassessing their living arrangements in the wake of lockdown, both transactions and prices have risen sharply in recent months.
Data from Halifax shows the average home now costs eight times the average wage, the biggest gap since it started collecting records in 2011.
Halifax can now lend 5.5 times your income
To help wealthier clients to borrow the money they need, Halifax has relaxed mortgage borrowing rules for millions of wealthy homebuyers.
If you earn more than £75,000, Britain’s biggest housing lender will now lend you up to five-and-a-half times your annual income, up from a previous limit of five times.
Analysts said that the move suggests Halifax expects the property market to remain resilient despite the threat of rising interest rates, and that it doesn’t anticipate that prices will fall, even if the Bank of England decided to hike rates.
Andrew Wishart, an analyst at Capital Economics, says that it shows lenders were not concerned about the market.
He says: “Banks bolstered their profit margins when the base rate fell to 0.1% and house prices didn’t fall, as they expected. This has kept lenders confident in the face of interest rate increases.”
He also believes that more lenders are likely to follow suit by relaxing income rules.
What this means is that, if you earn more than £75,000, your borrowing potential will increase based on your income. This is great news if you’re looking for a large loan, or to stretch yourself to buy a new home or remortgage your current property.
Our affordability expertise can help you to get the mortgage you need
While interest rates, fees and terms are all important when it comes to getting a mortgage, they are all irrelevant if a lender won’t lend you the amount you’re looking for!
So, finding a bank or building society with the ability to agree the loan size you want should always be your first step.
This is where working with a mortgage broker can really add value. Rather than speaking to a range of lenders individually, and going through multiple affordability checks, we can help you find the right lender for you quickly and easily.
For example, we have access to software that can search across dozens of lenders and analyse which of them will lend the amount you need, based on your income and their affordability criteria.
Once we have collected information from you concerning the property, and your income, debt, and expenditure, we can use this tool to access multiple lenders. This enables us to discover, in just a few minutes, what each lender will potentially agree.
Once we’ve found a lender (or lenders) who will agree the mortgage you need, we can then find interest rates and terms that suit you.
It’s a great way of saving time and effort and establishing early on in the process that there’s a lender out there that can help you.
Get in touch
If you’d like to explore your borrowing potential, or you’re looking to borrow a high multiple of your income, we can help. Email [email protected] or call us on +44 (0) 20 3411 0079 to find out more.
Please note
Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.
