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Third of average earners unable to get mortgage amount requested

Paloma Kubiak
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Paloma Kubiak

Nearly a third of mortgage applicants whose household income was less than the average level of £62,000 in the UK were offered a loan size smaller than requested.

This compares to 11% of mortgage applicants with a household income of £100,000 who were refused the mortgage amount they requested.

According to the latest MBT affordability index, around 12% of borrowers whose household income was between £62,000 and £100,000 were not offered the loan size they wanted.

The index also found that in March, 37% of borrowers aged 65 and over were able to get the loan size they requested, compared to three quarters of younger people. 

It also showed that 28% of borrowers aged 65 and up were offered a smaller loan size than they requested. For those under 65, 24% were offered a smaller loan. 

According to the Office for National Statistics, the median annual pay of a full-time employee in the UK was £31,000 in 2021. The median income figure of £62,000 assumes joint mortgage applications from two employees.

Tanya Toumadj, chief executive at Mortgage Broker Tools, said mortgage affordability was becoming more challenging for everyone as house prices continue to rise amid the spiralling cost of living. However, this was having a more “significant impact” on those earning less than the median salary.

She said: “This is perfectly logical, of course, as the basic costs of living are the same for everyone, so those earning lower salaries have less disposable income each month once they have paid for essentials like food, power and fuel.

“However, it’s important that this sizable portion of the population are not disenfranchised from the ability to secure a mortgage to buy a home.”

Toumadj added that its data showed that 70% of cases in April where the household income was less than £62,000 were offered the loan size they wanted and there are options that are “sustainable and affordable” for lower income borrowers. However, she noted there may be fewer lenders able to offer those kinds of deals.

“The emphasis then is on the importance of mortgage brokers carrying out thorough affordability research across the market, to ensure that they are able to secure the best affordability solution for their clients. This really matters.

“According to research conducted previously, only 58% of brokers search outside of the top 10 lenders, and the difference in affordability results by not searching the whole of market is huge with the top lender for affordability being outside of the top 10 lenders in 73% of cases,” she said.