14 Apr UK lenders tighten affordability tests

With soaring energy bills, an increase in the cost of household groceries and goods, as well as the national insurance rise, more and more families are seeing their salaries and budgets pushed to the max.

And in light of all this, UK lenders are set to tighten their mortgage affordability tests making it harder to borrow as much as previously.

With households feeling the pinch, Santander is currently updating their affordability models and other big high street lenders including Barclays, HSBC, NatWest, and Lloyds are set to follow.

Many banks use the national household spending figures from the Office of National Statistics (ONS) to determine a borrowers spending, and with the ONS data soon to include these higher living costs, the amount some people may be able to borrow could be seriously impacted.

Senior analyst Ray Boulger at broker John Charcol said:
“This is arguably the biggest tightening in mortgage lending since 2009 because interest rates are increasing, and we are experiencing the largest rise in the cost of living since the 1980s. The difference between now and back then is that banks had a huge shortage of funds then, whereas now the banks are looking at what their customers can afford.”

High street lender Halifax said that the average house price hit a record £282,753 last month – a tenth higher than the previous year – making this the biggest annual jump since the financial crisis.

Halifax managing director Russell Gallery said:
“Buyers are dealing with the prospect of higher interest rates and a higher cost of living. With affordability metrics already extremely stretched, these factors should lead to a slowdown in house price inflation over the next year.”

All doom and gloom?

Although there is a lot to be concerned about currently with the costs of living rising by so much, there are still plenty of options available for first-time buyers and those already with a mortgage or property portfolio. As we are a broker, we have access to a panel of lenders, not just the high street banks and we can often get a better deal by looking elsewhere. The team will work hard to understand your needs and financial situation to find the mortgage deal that is Best 4U.

Contact us today on 01536 411 144