New mortgage policy will allow first-time buyers to borrow more… but where will people benefit most from the change?
Lloyds Bank and Halifax have announced a new mortgage policy that will allow first-time buyers to borrow up to 5.5 times their income, an increase on the previous limit of 4.49 times. Under this new guideline, Lloyds and Halifax will use a 5.5 times mortgage-to-salary ratio to determine lending amounts.
In real terms, this means that a prospective solo buyer earning £30,000 could now potentially secure a mortgage of up to £165,000, compared to the previous limit of £135,000 under the 4.5 times ratio.
Which cities have become affordable?
Prior to this rise in borrowing limit, data analysis showed only three UK cities were affordable for solo buyers on an average wage. Because of this new policy, however, this number has now jumped to 17 cities. And if you’re buying as a couple and both earn an average salary, previously 56 cities were affordable. This has now jumped to 69 cities.
Among the cities that have now become affordable to solo buyers are Wigan (where the average house price of £172,593 is now affordable for a person on an average wage of £26,704), Liverpool (where someone on an average wage of £30,030 can now afford the average house price of £193,252) and Coventry (where the average house price of £231,793 is now affordable for someone on the average wage of £36,199).
For couples, Bournemouth, Bristol and Colchester could now be on the cards, with average house prices of £356,668, £377,052 and £308,227 respectively now within reach.
Seek advice before borrowing
While this is good news for first-time buyers, as it opens the potential of a wider and more varied house-search area, it’s important to remember that all borrowing has associated risks and, if you’re borrowing at a higher limit, your monthly mortgage repayments will be higher, too.
If you’re a first-time buyer and you’re keen to know what this new borrowing limit could mean for you and your finances, we’re here to help you understand all your options.