Average mortgage size shrinks in July as lenders question affordability
The minimum average loan size fell to £136,000 in July compared to £150,000 in January, according to the Mortgage Broker Tools (MBT) affordability index.
The maximum average loan size that lenders will offer has also fallen slightly from £274,000 in June to £270,000 in July.
For borrowers who require a high loan-to-income mortgage, only 22 lenders were available or affordable in July, a drop from 27 two weeks earlier. This indicates that mortgage lenders are tightening their criteria for people who are borrowing against higher income multiples, MBT said.
Tanya Toumadj, chief executive at MBT, said: “Having watched house prices rise sharply, in addition to seeing the onset of an acute cost of living crisis, it might not be surprising that affordability is taking a hit. However, all of these factors are also likely to have a knock-on effect, with potential buyers struggling to afford to enter the property market.”
She noted that experts across the market are predicting house price falls over the next two years, with Capital Economics suggesting as much as a 12% drop in London, and some reports of down valuations emerging already as a result. However, she said there are contradicting reports that a downturn in the housing market will further reduce supply, which would help to underpin prices.