The results of a Halifax survey have this week revealed that home buyers confidence in the UK property market could be at its lowest in more than three years.
The annual Halifax Housing Market Confidence tracker has revealed that more than a third of people asked say that rising house prices are a barrier to buying property, a staggering increase from 20% this time last year.
“Whilst this is probably welcome news for those who are thinking of selling in the coming year, it’s yet another sign that the gap between renting and buying is growing ever bigger” says Steve Clements, Senior Consultant at specialist broker Contractor Mortgages Made Easy.
“With mortgage lending criteria being tightened continually, obtaining funding is becoming more difficult than ever before for many clients” adds Steve. “The number of first time buyers in the first half of 2014 was actually significantly higher than the same period last year; however it also follows that mortgage approval is becoming more difficult in light of MMR.”
Recent limits introduced by the major players in the UK mortgage market on loan to income (LTI) ratio’s will only add to the problems faced by those trying to get on the property ladder.
“In light of the Mortgage Market Review, many lenders have introduced caps on LTI – that is the number of times your ‘mortgageable’ income you can borrow, i.e. £100,000 on an income of £25,000 is 4 times” says industry expert Taj Kang.
“This means that there is a very real risk that people could get the wrong impression of the amount that they can borrow, based on their income, and potentially face problems further down the line when it comes to mortgage underwriting.”
The confusion begins when trying to work out what income each bank will use for mortgage purposes. An all-too-common situation for people who work in less conventional ways, says Steve Clements.
“The added complication for many Contractors is just what makes up that income for mortgage purposes. We continuously speak with clients who have approached their bank, thinking their daily rate of many hundreds of pounds is more than enough, only to find that they would struggle to obtain funding to purchase a new car, let alone a family home” adds Clements.
“With recent news coming out of HMRC regarding the taxation of certain schemes, many contractors are unsure of how contract income will be viewed, and trying to obtain mortgage funding on that basis could be subject to further scrutiny.”
Help is at hand though, and the opportunity should be taken to seek professional advice so as not to risk damaging your credit file, says Steve.
“By speaking with a specialist broker, you can ensure that not only is more of your income taken into account for mortgage purposes, but also that you avoid the possibility of an application being declined which in turn could seriously jeopardise the chances of even a specialist broker being able to help.”
Article By: Mark McBurney, Senior Mortgage Consultant at Contractor Mortgages Made Easy
Media Contact: Raman Kaur, Public Relations Manager
Tel: 01489 555 080