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First-time Buyer

Treasury rejects appeal to use rent to prove mortgage affordability

Joanna Faith
Written By:
Joanna Faith

The Treasury believes a borrower meeting rent payments is not sufficient evidence to demonstrate they can afford a mortgage.

It said this was because a wide range of factors needed to be considered, including household expenditure, loans and quality of living costs.

The statement came in response to a petition posted on the Parliament website which has received almost 150,000 signatures.

The petition, which was set up by 27-year-old Jamie Pogson from Plymouth, called for paying rent on time to be enough proof that a borrower was able to meet mortgage repayments.

With rising house prices and rents, first-time buyers have been finding it difficult to save large enough deposits without help from parents. The Office for National Statistics also revealed how housing affordability had rapidly worsened in the last 20 years.

Regulatory backing

However, the Treasury backed the stance taken by the Financial Conduct Authority (FCA) in requiring lenders to take a wider measure of mortgage affordability.

“These [regulations] were aimed at addressing the problems previously caused by poor quality mortgage lending, such as borrowers falling into payment difficulty and, ultimately, losing their home,” it said.

The statement added: “It is important to be aware that home ownership brings a number of additional expenses that may not be incurred when renting, including maintenance costs and buildings insurance.

“Before extending a loan, lenders must satisfy themselves that a borrower will be able to meet these additional on-going costs when considering a mortgage application.”

Commercial interventions

Treasury also noted that other sources such as credit reference checks indicated the likelihood of a borrower repaying the loan.

And it added that the government did not want to intervene in commercial decisions for lenders.

“Whilst one lender may be unable to offer a mortgage, being denied a mortgage from one provider does not preclude a customer from being offered credit elsewhere.

“There are a wide variety of mortgage products available in the UK and prospective borrowers may benefit from shopping around,” it concluded.

Despite the government’s negative response to the petition, MPs will still have to debate the matter as it achieved more than 100,000 signatures.

A date has yet to be scheduled for the debate.