Mortgage Borrowing Limits

When our advisers first started their careers, lenders offered a simple multiple of 2.5 times the higher earner’s income and once times the secondary earner’s income.

As economic conditions changed and lenders chased market share this multiple rose through 2.75 times up to 3.5 times in the 1990’s and on to over 4 times income in the early “noughties” peaking at up to 5 times the principal earner’s income or up to 4 times the joint income in some cases by 2007.

Over the years lenders have introduced unpublished rules based on affordability that could take borrowers as high as 6 times their income.

During most of the period that Bank of England Base Rate was at a 300 year low from March 2009 for 13 years there was a mandated lending restrictions for most borrowers at around 4.5X income. Counter intuitively as rates have risen lenders have in recent years been encouraged to offer up to 6.5X income – this is not an offer that suits everyone, what concerns us as your advisors, is long term affordability and your ability to stay in your home.

We will assess at what level you should be borrowing based on your current expenditure and income profile and recommend a maximum loan you should consider – this may well be less than the simple approach of taking your income and multiplying it by a lender’s published criteria. We have learned over the years that property purchase can cause people to take enormous leaps of faith with their financial future that sometimes do not pay off – we will work with you to assess the availability of funding at the level you want then choose the most appropriate scheme and lender to match your requirements.