- Published
If you're working towards buying your first home you might feel like everything is stacked against you - but recent changes could help you get a mortgage.
uncertain
you → publish → mortgage
It hard to save for a deposit when the cost of living is so high, the average house price is nearly £300,000, external and interest rates on new mortgages are rising.
asserted
rates → save → mortgages
However, a rule change and more flexible lending mean first-time buyers can now borrow up to six, or at the most, seven times what you earn in a year.
asserted
you → mean → year
This means mortgages will be within reach for more people but it is a shift that comes with some risk so here's what you need to know.
asserted
you → mean → what
Reckless mortgage lending was blamed for the financial crisis of 2008, which brought some banks to their knees and saw people lose their homes.
asserted
people → blame → homes
In 2014, the business secretary of the time, Vince Cable, said he was appalled that some mortgage providers were lending five times a mortgage applicant's income, suggesting a stable level was up to 3.5 times.
But house prices have risen significantly since, outstripping wage rises most of the time.
asserted
prices → say → time
So a bigger loan has become the only option for many potential buyers.
asserted
loan → become → buyers
Regulation limited how much lenders were able to lend - technically, only 15% of their new mortgages could be at higher than 4.5 times loan-to-income.
uncertain
% → limit → income
Many of the big lenders played it very safe meaning they didn't get close to the limit.
asserted
they → play → limit
The change
But those rules have been relaxed, external over the last year.
asserted
rules → relax → year
Many lenders are offering bigger loans compared with your income, with niche lenders and building societies at the highest end.
"
asserted
lenders → offer → end
The greater flexibility could mean that first time buyers that felt ownership was still out of reach may find that the amount they can borrow has changed markedly in a relatively short time," says David Hollingworth, of mortgage broker L&C.
The idea of taking a big income stretch is not going to be for everyone, says Aaron Strutt, of broker Trinity Financial.
uncertain
Strutt → mean → Financial
"But it is tempting for many because it gives them the option to get out of renting or living with parents," he adds.
asserted
he → give → parents
What you need
asserted
you → need → What
There are still strict criteria you most likely need to meet as a first-time buyer to be offered a larger mortgage.
asserted
you → be → mortgage
They may include:
A good credit history with limited credit card debt and loans and no missed payments
A regular salary, ruling out many who are self-employed
A salary large enough to qualify for specific mortgages, which varies depending on the borrower and the lender
An acceptance to borrow at a certain interest rate usually for five or 10 years, rather than two
Enough savings to offer a deposit, although the options for low-deposit mortgages have increased too
Also, circumstances can change, such as what is on offer when you come to renew or shop around for another mortgage after five years.
uncertain
you → include → years
Lenders may become more picky if the economic outlook takes a turn for the worse.
uncertain
outlook → become → worse
Personal circumstances can change too, such as losing a job, having to take time out to care for a loved one, or illness of your own.
asserted
circumstances → change → own
"Ideally you need to have a cash buffer or a plan in case something happens financially," says Strutt.
asserted
Strutt → need → case
- Published
If you're working towards buying your first home you might feel like everything is stacked against you - but recent changes could help you get a mortgage.
uncertain
you → publish → mortgage
It hard to save for a deposit when the cost of living is so high, the average house price is nearly £300,000, external and interest rates on new mortgages are rising.
asserted
rates → save → mortgages
However, a rule change and more flexible lending mean first-time buyers can now borrow up to six, or at the most, seven times what you earn in a year.
asserted
you → mean → year
This means mortgages will be within reach for more people but it is a shift that comes with some risk so here's what you need to know.
asserted
you → mean → what
Reckless mortgage lending was blamed for the financial crisis of 2008, which brought some banks to their knees and saw people lose their homes.
asserted
people → blame → homes
In 2014, the business secretary of the time, Vince Cable, said he was appalled that some mortgage providers were lending five times a mortgage applicant's income, suggesting a stable level was up to 3.5 times.
But house prices have risen significantly since, outstripping wage rises most of the time.
asserted
prices → say → time
So a bigger loan has become the only option for many potential buyers.
asserted
loan → become → buyers
Regulation limited how much lenders were able to lend - technically, only 15% of their new mortgages could be at higher than 4.5 times loan-to-income.
uncertain
% → limit → income
Many of the big lenders played it very safe meaning they didn't get close to the limit.
asserted
they → play → limit
The change
But those rules have been relaxed, external over the last year.
asserted
rules → relax → year
Many lenders are offering bigger loans compared with your income, with niche lenders and building societies at the highest end.
"
asserted
lenders → offer → end
The greater flexibility could mean that first time buyers that felt ownership was still out of reach may find that the amount they can borrow has changed markedly in a relatively short time," says David Hollingworth, of mortgage broker L&C.
The idea of taking a big income stretch is not going to be for everyone, says Aaron Strutt, of broker Trinity Financial.
uncertain
Strutt → mean → Financial
"But it is tempting for many because it gives them the option to get out of renting or living with parents," he adds.
asserted
he → give → parents
What you need
asserted
you → need → What
There are still strict criteria you most likely need to meet as a first-time buyer to be offered a larger mortgage.
asserted
you → be → mortgage
They may include:
A good credit history with limited credit card debt and loans and no missed payments
A regular salary, ruling out many who are self-employed
A salary large enough to qualify for specific mortgages, which varies depending on the borrower and the lender
An acceptance to borrow at a certain interest rate usually for five or 10 years, rather than two
Enough savings to offer a deposit, although the options for low-deposit mortgages have increased too
Also, circumstances can change, such as what is on offer when you come to renew or shop around for another mortgage after five years.
uncertain
you → include → years
Lenders may become more picky if the economic outlook takes a turn for the worse.
uncertain
outlook → become → worse
Personal circumstances can change too, such as losing a job, having to take time out to care for a loved one, or illness of your own.
asserted
circumstances → change → own
"Ideally you need to have a cash buffer or a plan in case something happens financially," says Strutt.
asserted
Strutt → need → case
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