UK lender allows buyers to borrow seven times their salary | Real estate

A mortgage lender allows homebuyers to borrow up to seven times their income – well above the traditional maximum – which he says will allow some to buy a property they might have thought was well outside of their price range.

Habito’s new formula for calculating how much people can borrow is considerably higher than the typical industry maximum of between four and five times salary, and although it may allow some buyers to increase their ambitions of buying property, it could also reignite the debate on responsible lending. practices.

However, these more generous terms are only available to people who take out one of the company’s “fixed life” mortgages launched this year, which allow borrowers to lock in their monthly repayments at the same level for 40 years.

Banks and mortgage lenders look at various aspects of people’s finances when deciding how much mortgage they will allow someone to take out.

Traditionally, the maximum ‘income multiple’ available in the UK has been around 4.5 times salary, although in 2020 a number of major lenders, including Halifax and HSBC raised their limits to 5.5 times for some borrowers.

Habito’s new conditions apply to his Habito One mortgage. To be able to borrow seven times their income, applicants must work in one of many professions, including firefighters, police, NHS clinicians, such as nurses and paramedics, as well as public sector teachers – and earn a minimum basic salary of £ 25,000 per year.

Higher income individuals with a minimum base salary of £ 75,000 are also eligible. Borrowers will need a down payment of at least 10%.

In a joint application, only one person will be accepted for a maximum of seven times their salary, while the other will see their salary multiplied by five. Mortgage interest rates start at 2.99%

Daniel Hegarty, Founder and CEO of Habitito, said: “Longer fixed rate mortgages mean that customers are completely protected against any threat of fluctuating interest rates, in a way that shorter mortgage contracts two or five years do not allow. for.

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“As a lender who reviews each applicant’s case individually, we are confident that with the right criteria in place, under the right circumstances, eligible clients can safely increase their borrowing to purchase the home that truly matches their needs. needs and their life plans.. “

Nick Mendes, technical head of mortgages at broker John Charcol, said the mortgage market is about to change – this month the Bank of England announced plans to ease mortgage rules – and he expected more from these types of agreements.

However, he suggested that it could lead to higher prices. “If more people know that they can expand their multiple income and borrow more, it will have a ripple effect in the housing market – much like with the stamp duty holiday,” he said.

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