Can I Get A Mortgage Today
The Big Question – Can I Get A Mortgage?
Probably the main question on most people’s lips regarding the UK housing market at present is “Can I get a mortgage?” Borrowers are stuck between lenders not lending and a housing market that is stuck in a rut.
Affordability is key as with the desire for lenders to lend. 100% mortgages are in the main a thing of the past as the risk factors are too great for lenders. In today’s market as a rule of thumb a deposit of 10% or more is the requirement. First-time buyers will inevitably have issues raising £10-£20k deposits which is why there are guarantor type mortgages out there to help these people onto the housing market.
Affordability is the buzz word at the moment influenced by the recommendations of the Financial Services Authority (FSA) to regulate lenders on who they lend to and how much they should lend. The way the affordability is calculated can be broken down into these key points:
Interest level calculation
One of the recommendations is to base the repayment calculations at 2% above the lenders standard variable rate (SVR). Moving forward this may not be such a bad idea as lenders of high SVRs may have to reconsider those rates in order to be able to lend, especially when the market becomes more buoyant.
Borrowing level
Lenders will have to look at the outgoings and day to day living costs of the potential mortgagee rather than a basic income multiple. Future interest rate increases will also have to be brought into the calculations which could restrict the amount the lender can offer.
Remortgaging
The rules would apply to all new mortgages including those wishing to remortgage. The snag here is that the new rules may severely limit the choice of product for the customer and they could end up stuck in their current deal. The lender may be able to offer another deal in their range but it may not be very competitive.
Self employed
The self employed will be able to have a mortgage but rather than the self-certification mortgage which the FSA is proposing to ban mortgage offers will be based on real proof of income by borrower. This may be in the form of tax returns, audited accounts and bank statements.
This is a real concern for most customers as one side you have the lenders potentially not lending and on the other side there is a fine balancing act with the stability of housing market. Many agree that house prices need to come down but that leads the borrower in a void with nowhere to go other than sit with their current deal.
The ambiguity between the Bank of England base rate and the interest rates being offered by the lenders at the front of an inevitable base rate rise and stale market must leave many not thinking “can I a get a mortgage” but “do I want a mortgage?”
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