Cost of living and mortgages

ended 17. January 2022

A journalist at the Daily Mail wants to know if the cost of living crisis is impacting mortgage lender behaviour. Few Qs below. Deadline is fairly tight - 15:00.

  • Are lenders reluctant to lend as much now given the rising cost of living?
  • Are rising energy bills and the incoming National Insurance hike cutting the size of loans people can get?
  • Do you think this is likely to happen in the months ahead?
  • Do you have any examples of buyers who have missed out on, or are finding it harder to get, a mortgage because of lenders being more conservative due to soaring inflation? If so, would they be a case study (named and photographed)?

Any other thoughts, jot them down!

9 responses from the Newspage community

Star Quote
"Fortunately, the sharp increase in the cost of living has yet to impact mortgage lending, however many in the industry feel this breathing space will be short-lived. As monthly outgoings increase, mortgage lenders have a duty and obligation to ensure their affordability checks factor this in. For those with small amounts of disposable income available each month, applying for a mortgage will only become tougher than ever this year. For those in the fortunate position of earning £75k+ per annum, we have actually seen lenders become more generous, with more lenders recently announcing their willingness to lend up to 5.5x combined income for people in this category, whilst limiting it to as low as 4.5x for those below this threshold. As always, the rich get richer!"
"Things don't seem to be biting yet when it comes to affordability. If anything, lending criteria seem to be getting more generous. You'd think though that it's only a matter of time before lenders get more cautious when everyone faces bumper electricity bill rises and N.I. increases in April."
"Mortgage lenders have recently relaxed lending rules around borrowing multiples meaning, in some cases, you can get up to 6 or even seven times your income so it's easier to get larger loans despite the cost of living crisis. If the cost of living crisis continues, it'll likely have some impact, although it won't make any difference for those without unsecured debt and above-average salaries. For now, the best advice is to keep calm and carry on."
"For now at least, I've not seen the pending increase in the cost of living influence lenders. I don't think we will see any real change until the official cost of living data is updated within the Office Of National Statistics figures, as most lenders use these in their affordability calculations. However, even with these increases I'm not expecting a marked drop in the volume of mortgages offered by lenders."
"The cost of living crisis and inflation are definitely going to impact mortgage affordability, potentially reducing the maximum loan available. Even if mortgage lenders don't change their criteria, they already take average outgoings into account. So if your bills rise in 2022 more than your wage, then this will be used by lenders when calculating what mortgage you can afford."
"Lending criteria are already tightening. Underwriting teams are factoring the higher cost of living into their affordability assessments. They're not just looking at the huge increase in energy bills when the price cap is raised in April, but the much higher food and petrol prices that are already with us. They'll also be anticipating further hikes in the Bank of England base rate over the coming months, and by extension, more expensive mortgages."
"The cost of living increases has caused a panic amongst homeowners over the age of 55. In December and January so far we have received more enquiries than ever before from pensioners concerned about how they can make ends meet in 2022. The combination of stagnant pensions, increasing inflation and rocketing car and fuel bills has created a stressed generation. Traditionally, equity release has been used to pay off a mortgage at the end of term, to gift to children or to make home improvements. However, an increasing number of homeowners are looking to increase the amount they raise to cope with soaring living costs. Fortunately, modern equity release is able to cope with these demands as features such as drawdown mortgages enable the withdrawal of funds as and when needed, which greatly decreases the accumulated interest paid."
"If anything, lenders have been loosening affordability criteria overall, not tightening. For the time being at least, lenders are largely ignoring any cost of living crisis, reacting instead to lower interest rates and the recovering economy to offer more generous income multiples, better affordability and increased loan amounts for many borrowers."
Whilst lenders are not overtly changing anything as yet, you can bet that within their little box of mysteries that runs their affordability calculators changes are not far away. Whilst I do not expect this to have a massive effect just yet, it may well start to impact those on the margins who are looking to push their borrowing capacity as far as possible, especially at higher Loan-To-Values.