Buy To Let
New mortgage rules will hit ‘self-employed and people earning under £25k’
Stricter mortgage criteria could bar the self-employed and those earning less than £25,000 a year from the mortgage market, a leading lender has said.
New regulatory changes, due to come into force on 26 April, will see lenders focus on ‘affordability’ rather than income multiples.
However, Paul Winter, chief executive of Ipswich Building Society, said small business owners and those with unusual income types like pensions, equity in a business or property could fail automated lending assessments.
“It is entirely appropriate that the Financial Conduct Authority (FCA) wishes to introduce regulation to ensure the lending excesses of pre-2008 are not repeated and that irresponsible lending is firmly tackled. ” he said.
“However, I am concerned that people on average incomes may now find it harder to obtain a mortgage and I believe this may prove to be an unintended consequence of the methods used to implement affordability requirements.”
In an example, Winter said a family of two adults and two children wishing to purchase a property for £125,000, with a household income of £30,000 and with a 10 per cent deposit, would not meet a computer’s affordability model.
Winter said: “The Government needs to address housing supply issues rather than potentially limiting those on average incomes from obtaining a mortgage. Many aspirational home owners are facing a double lock: unavailable lending and a lack of homes to choose from.”
