Can you borrow too much?

August 30, 2017 by Brendan O'Neill

Borrowers

According to the Bank of England, 25% of borrowers have a mortgage which is equivalent to four times their income, while 140,000 have borrowed four and a half times their income, which is considered to be risky.

As property prices continue to increase at a much faster rate than wage growth, home buyers stretch themselves to be able to get onto the property ladder. As the situation continues, and borrowers take on larger mortgages, is it possible for your home loan to be too high?

Although there have been new regulations introduced since 2014, designed to ensure that borrowers can afford their mortgage repayments, data collated by the Bank of England indicates that there are more mortgages being approved at higher multiples of income.

Lenders assess affordability in a number of ways, including lending a multiple of your income. However, the number of mortgage loans hat are higher than five times annual income have fallen recently.

Sole home buyers can find it more difficult in the current economic climate to get onto the property ladder. This is reflected in figures which show that the number of loans approved that are higher than four times the salary earned has increased, in comparison to those that are between three and four times the income.

It is crucial to ensure that you can afford a mortgage, taking into account potential rate increases and all the other expenses that come with buying a property. Mortgage advisors gain experience in calculating affordability while they study on CeMAP courses, which places them in the ideal position to offer advice.