Mort­gage af­ford­abil­ity ac­tu­ally on the rise for first-time buy­ers

Mort­gage Mat­ters

Yorkshire Post - Property - - PROPERTY NEWS -

Franz Muehlthaler, mort­gage ad­viser, Hol­royd Miller Prop­er­ties

I’m con­cerned that the cost of living is con­tin­u­ing to rise and my chances of gain­ing ap­proval for a mort­gage are slip­ping away un­der the af­ford­abil­ity rules.

There’s some good news con­cern­ing af­ford­abil­ity. Mort­gage af­ford­abil­ity is ac­tu­ally in­creas­ing not de­creas­ing, as the av­er­age in­come re­quired to se­cure a mort­gage re­duces by over eight per cent. The lat­est data from Mort­gage Ad­vice Bureau high­lights the in­creas­ing af­ford­abil­ity of mort­gages for first-time buy­ers, home movers and those who are re­mort­gag­ing.

As of De­cem­ber 2016, the av­er­age in­comes for those ap­ply­ing to bor­row for a home pur­chase or a re­mort­gage have fallen an­nu­ally by 8.13 per cent and 8.9 per cent re­spec­tively.

This sug­gests that more house­holds are now able to bor­row to ei­ther buy their next prop­erty or re­fi­nance their ex­ist­ing home than pre­vi­ously.

The prob­a­ble rea­sons for this pos­i­tive emerg­ing trend in­clude record low in­ter­est rates. Sus­tained in­tense com­pe­ti­tion within the pro­vi­sion of lend­ing prod­ucts and pric­ing has en­sured in­ter­est rates have re­mained at or around record lows. Lender flex­i­bil­ity also plays a part. Lenders con­tinue to en­sure af­ford­abil­ity at all costs, how­ever some eas­ing of cri­te­ria and im­proved af­ford­abil­ity as­sess­ments has re­sulted in po­ten­tially more bor­row­ers get­ting ac­cess to mort­gage fi­nance.

Brian Mur­phy, Head of Lend­ing for Mort­gage Ad­vice Bureau says: “When we look at the down­wards move­ments in salaries, e.g. for first-time buy­ers, re­mort­gage and home mover pur­chases, this per­haps in­di­cates that lenders are be­ing slightly more flex­i­ble and ac­com­mo­dat­ing in terms of salary mul­ti­ples.

“Mort­gage rates are lower than they were 12 months ago, there­fore af­ford­abil­ity has im­proved, mean­ing that salaries don’t need to be as high as they were a year ago in or­der to bor­row the amounts re­quired by con­sumers, and this may be re­flected in the slight down­wards move­ments in av­er­age salaries.”

Over­all ac­tiv­ity was still strong in De­cem­ber, con­sid­er­ing sea­sonal fac­tors and over­all po­lit­i­cal and eco­nomic cli­mate. It was in­ter­est­ing to see that over­all hous­ing trans­ac­tion lev­els for 2016 were steady at just over 1.2m, a slight in­crease on vol­umes in 2014 and 2015, as noted in the lat­est HMRC res­i­den­tial trans­ac­tion data.

Last year saw sev­eral new lender brands en­ter the mar­ket, which has trig­gered an even more com­pet­i­tive in­ter­est rate en­vi­ron­ment, mean­ing that every type of bor­rower has ben­e­fited from lower rates, par­tic­u­larly since the in­ter­est rate cut in Au­gust.

How­ever, as there has been some up­ward pres­sure on Swaps, it’s pos­si­ble in 2017 we may see some up­ward move­ment in terms of fixed rate pric­ing, but with com­pe­ti­tion in­tense, many lenders may be pre­pared to sac­ri­fice mar­gin to main­tain vol­umes and mar­ket share.

With re­gards the av­er­age buy-to-let pur­chase price, a down­ward move­ment is to be ex­pected, as lenders ap­plied the lat­est PRA ren­tal stress test cal­cu­la­tions in De­cem­ber.

This led to some land­lords be­ing priced out of the more ex­pen­sive ar­eas due to not be­ing able to meet in­come cov­er­age ra­tio cri­te­ria, mean­ing that they have pur­chased in cheaper ar­eas.

In terms of the monthly fall of the av­er­age first-time buyer pur­chase price, this is likely to be as a re­sult of sea­son­al­ity and the fact that ven­dors have of­fered first-time buyer a re­duc­tion.

Franz Muehltha­leris a mort­gage ad­viser with Hol­royd Miller Prop­er­ties in as­so­ci­a­tion with Reach 4 Mort­gage So­lu­tions and the Mort­gage Ad­vice Bureau.

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