Even at 7 times income, single home buyers are out of the £24,000 market


New research has found that despite many lenders relaxing their income-based loan criteria, the average UK homebuyer is still out of the market, unless they’re buying with a partner.

Research by Henry Dannell shows that the current average loan-to-value ratio, or multiple of wages a lender will lend to a buyer, has fallen from 3.87 to 4.12 over the past ten years, an increase 6.5%.

While this lending benchmark has traditionally ranged between 4 and 4.5 times income for a single applicant and 3.5 to 4 times income for co-applicants, last year major lenders began to lift caps. to offer up to 5.5 to borrowers meeting certain criteria, with some up to 7 times income for some applicants.

While these increases have been met with some skepticism and concern, Henry Dannell’s research suggests that for some homebuyers, even this higher rate would see them struggle with the current cost of moving up the ladder.

With the current average house price at £270,708, a 10% mortgage deposit would require the average buyer to pay £27,071 when looking to buy, leaving £243,637 to borrow.

However, with an average UK income of £31,447, even an above average income loan rate of 4.5 would leave them £102,126 less than a purchase.

In fact, even if they committed to 15 years of fixed rates and opted for an income loan rate of 7 times their income, they would still be £23,508 less than the current average house price.

The picture is, at least, a bit better for those looking to buy with a partner.

A joint application, based on the current income of the average British man and woman and a 10% down payment, would require an income loan rate of around 3.92 in order to borrow enough for the UK home medium.

Henry Dannell manager Geoff Garrett commented:

“We have seen some lenders relax their criteria in recent months and despite rising interest rates, homebuyers continue to enjoy very favorable borrowing terms.

However, house prices have also risen significantly, which has weighed on affordability for the average homebuyer, especially those trying to go it alone without the added support of a second income when borrowing. .

Of course, the real estate market is extremely diverse and therefore different levels of income and property value will bring different levels of affordability.

Your loan to income ratio will also be influenced by a range of factors such as type of job, base salary, any additional income, credit history and whether you are full-time or self-employed.

So, understanding what you can borrow will give you a good idea of ​​where you stand in the market.

But with house prices set to rise further, it underscores the importance of saving a substantial deposit and ensuring you find the best deal for your personal circumstances when looking to secure a mortgage in principle.


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