Mortgage borrowers dealt another blow after two major banks restrict lending
Barclays limits loans to just 4.49 times someone’s income
NatWest also quietly reduces the amount some customers can borrow
Mortgage borrowers have been dealt another blow after two major banks heavily restricted how much they will lend to home buyers. The High Street giants have introduced new caps on loan sizes. Barclays has limited loans to just 4.49 times someone’s income – down from five-and-a-half times previously. Borrowers were given no warning of the new rule, which also applies to those who have submitted applications.
Many borrowers have already been waiting weeks as banks struggle with backlogs from when the market was frozen and soaring demand following a recent stamp duty cut.
NatWest also quietly reduced the amount some customers can borrow. The bank has issued a new mortgage calculator for brokers that restricts lending to self-employed borrowers to 4.25 times earnings – down from 4.9 times.
Mortgage advisers fear more lenders will follow suit. Home buyers have already been facing a host of stringent new rules. Some banks will not lend to customers with small deposits or have barred borrowers using contributions from the Bank of Mum and Dad. Others refuse to consider bonuses, overtime and furlough money in assessing how much can be borrowed.
Rachel Dixon, mortgage broker, RH Dixon, said: ‘I’m disappointed at the banks’ sudden change of rules. These decisions clearly show lenders are concerned about the future of the economy, the end of furlough, the direction of house prices. I expect more lenders to follow in coming weeks.’
Barclays’ previous highest income multiplier was reserved only for top earners or first-time buyers using its popular Family Springboard deal. Borrowers with joint earnings of £100,000, borrowing 5.5 times their salaries, would be offered a loan of £550,000 if they had a deposit of at least 15%. The new rules mean the amount they can borrow will be more than £100,000 lower.
A NatWest spokesperson said ‘We continually review our proposition to ensure it is in line with market conditions.’
A Barclays spokesperson said ‘We regularly review our lending policies and today have made some changes to loan-to-income multiples.’
Fears surface for first-time buyers as lenders pull low-deposit mortgages
Experts are worried that many first-time buyers may soon be priced out of the housing market completely as more lenders pull low-deposit mortgages from the shelves. There are now just 51 deals for buyers with a 10% deposit to choose from after First Direct last week followed parent company HSBC in temporarily pulling its 90% loan-to-value deals.
This leaves just a handful of lenders left offering these mortgages, dealing a blow to first-time buyers who typically have smaller deposits and are finding their savings purchase power eroded by rising house prices.
Many of the remaining lenders offering these deals are smaller building societies which may restrict lending by buyer type, rate type, property type or even geographical areas. This comes as many movers across the country are feeling the benefit of the Chancellor’s recent stamp duty cut which sees no tax paid up to £500,000 on house purchases.
[Source: dailymail.co.uk/money, 6 September 2020]
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