A property expert has predicted that mortgage applicants are likely due to experience some difficulties being approved for loans.
It was stated by Jonathan Rolande, from House Buy Fast, that the cost-of-living crisis is set to result in banks introducing lighter and more stringent checks on those applying for home loans.
His comments come just days after Santander became the most recent bank to announce they were changing lending criteria and he suggested other banks follow suit.
He emphasises that responsible lending is crucial to the health of the property market, and it is clear lenders are changing criteria because of the massive increase in living expenses the nation faces.
Rolande said furthermore: “Many homeowners may now find themselves in a similar position to tenants who ‘didn’t earn enough’ to buy but paid far more in rent than a mortgage for the same property.”
“Owners may not be able to re-mortgage to reduce their monthly outgoings because of a shortfall in disposable income after increased bills are paid.”
It is recommended that a discussion with a bank or broker should be done as soon as possible to see if a mortgage is at the best rate since interest rate rises are widely predicted.
Those who are self-employed, particularly those who run as a limited company, are especially at risk as many pay themselves a lower dividend or wage to keep their taxes as low as possible.
As interest rates have seen a steady increase, banks have already begun to implement more stringent ‘stress tests’ on lending, which have been designed in such a way to check if borrowers can afford a standard variable rate of an additional 3%.
Tougher affordability checks and heightened stress tests could hit house prices
Marking the biggest annual jump since the financial crisis, Halifax has said that the average house price hit a record £282,753 in March, a tenth higher than the previous year.
Recently, Santander has made it even tougher for borrowers to meet its lending criteria because it told brokers it would be a clear reflection of the rise in household bills, National Insurance, and taxes.
There have also been reports elsewhere claiming that the largest high street banks, which includes HSBC, Barclays, Lloyds Banking Group and NatWest, are all considering making similar moves.
Experts also believe that the punitive checks will make it tougher to take out larger loans, which means that many people are now at risk of being unable to purchase their desired home.