When considering how much to lend, many mortgage companies consider a consumer’s ability to repay, rather than income multiples, according to analysts from moneyfacts.co.uk.
The Council of Mortgage Lenders has shown that the average first time buyer will borrow 3.24 times their income to put a deposit on a property.
Lenders are now using affordability models rather than income multiples.
Julia Harris, a mortgage analyst at moneyfacts.co.uk, said: “In an ‘ability to repay’ application, each case will be individually approved by way of an income and expenditure assessment, taking account of existing credit agreements, mortgage payments and contractual commitments.
“However, it should not be forgotten that affordability is taken account of in all applications, the difference being this may come at a later stage in the application process, normally at agreement in principle.”
Meanwhile, it has been found by moneyfacts.co.uk that mortgage payments now take up much more of a consumer’s income than they did ten years ago.
A massive increase in the average house price is thought to be the main reason behind this.
Currently the average house in England and Wales costs approximately £200,000
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