Money Mail mortgage request

ended 10. January 2022

The chief reporter at Money Mail has heard that telecoms providers have changed the way they charge for mobile contracts – half of it is now a loan. She's been told this may affect mortgage borrowing without families realising, e.g. a family of four paying £25/mth could see the amount they are able to borrow reduced by £25k (based on a £200k mortgage). Is this the case? Have you experienced it? Any other thoughts? Deadline is COB.


6 responses from the Newspage community

Star Quote
"I noticed this recently when I went to upgrade my phone; if it wasn't for me working in the industry I would have had no idea of the impact it could have on mortgage affordability. Usually a mobile phone contract includes a phone as part of the plan, so technically you get the phone for free. Recently, providers have started separating the cost of the plan, such as minutes and data, and the cost of the handset and putting the cost of the handset on a finance agreement. The difference is this now counts as a credit commitment which will show on your credit file as opposed to a phone contract which doesn't and credit agreements impact how much you can borrow."
Star Quote
"It's nothing new that mobile phone providers report data to credit reference agencies. Whether reported or not, regular commitments are taken into account for mortgage affordability. However, mobile phone contracts often show up on a credit report as a loan even though these contracts are technically not incorporated within the Consumer Credit Act. What people maybe don't know is that this means phone providers can report arrears and defaults, even if a default notice has not been served."
"Someone in their ivory tower thought this would be a great idea not realising the impact it can have on someone looking to purchase a home. We see it all the time, mobile phone contracts that now shows as a loan on the client's credit file this is party due to the cost of mobile phone handsets being close to £2000 for the latest top spec iPhone so anyone who is not buying the handset outright should be aware that this is now going to be treated just like any other finance you have on your credit file and will impact your borrowing."
"In isolation, £25 a month is unlikely to make a difference to most people's mortgage applications. That being said, every broker will have experience of clients making applications right at the limit of what they can afford and £25 a month as a deduction for a hard pressed first-time buyer who has just scraped together a 5% deposit and money for solicitors could be the difference between that client being able to get the mortgage amount they need or being a few thousand pounds short."
"This isn't something that has specifically come up as an issue with any application I have done, generally as the cost a client spends on their phone is the same in the affordability calculations whether it shows as £50 under communications, or £25 under communications and another £25 loan to fund the handset; the total is still £50. There are potentially issues as the cost of handsets climb, plus many lenders use ONS data in their affordability calculations which can have a lag to it. So a client could theoretically be seen as having a £25 loan for the handset, plus be allocated a £50pm payment from the ONS data, which in reality includes the handset as well as the calls."
"Any form of monthly or weekly payments that are registered on a credit file such as mobile phone contract can affect the amount you can borrow, as can a student loan that is deducted directly from wages at source, car insurance that's paid monthly rather than up front as an annual payment, and anything else in between. This is the reason it's best not to assume anything and talk with a good independent broker to establish your borrowing capacity at the very start."