First time buyers are getting a rough deal lately. As if it hasn’t been difficult enough to get onto the property ladder, banks are now throwing an extra spanner in the works by cutting their income multiples. And at a time when mortgages have never been more affordable!
Use our online calculator to see how much you could borrow.
Reducing income multiples
Many major banks have now reduced their income multiples for first time buyers, meaning they can essentially, borrow less than before.
“Income multiples” are linked to the salary earned by the borrower. For example, if someone earns £40,000, a lender offering an income multiple of five, would offer a maximum loan amount of £200,000.
Realistically, the income multiples for many lenders are now coming down to lower than 5 X income.
Saving for a deposit
Rising house prices has been a key factor acting against first time buyers. With the average house price in the UK now at over £270k, the deposit alone becomes too much to save for. In London, there has been a 15% increase in the last year, meaning the average house price is over £500,000!
First time buyers denied best rates
Many first time buyers therefore require £30,000 for just a 10% deposit. Some of the best deals on the market though are only available to those either already on the property ladder already or, those first time buyers with a much bigger deposit (typically 35%).
Example calculation
- Average property price: £300,000
- Deposit (c10%): £30,000
- Balance to be mortgaged: £270,000
- Income required to meet requirements: £54,000 (based on 5% income multiple)
The 4-fold problem
The depth of the problem is 4-fold:
1) Difficult for first time buyers to save for a deposit
2) Houses are priced outside the reach of first time buyers
3) Banks and lenders are increasing their income multipliers to levels which many first time buyers can not meet with their salaries
4) Those that do manage to get a mortgage are likely to be subject to higher interest rates
Dental & Medical Financial Services help first time buyers to obtain the best mortgage rates possible. Our specialist lenders have access to great rates for doctors and dentists. Call today.
Tel: 01403 780 770