Every aspect of life is becoming more expensive, so it shouldn’t be a shock to learn that homebuyers face fresh challenges.

Three increases in interest rates have made borrowing to buy a home more expensive, and it appears leading mortgage lenders are set to impose tighter restrictions on their lending.

Affordability tests are getting tougher. If you plan to arrange a mortgage soon, you must familiarise yourself with the new benchmarks in the industry.

HSBC has changed their requirements

HSBC requires applicants looking to borrow at 4.75 times their annual salary to earn a minimum of £50,000 per year. It used to be earning £40,000 a year would allow you to borrow at this rate.

Applicants who don’t earn a minimum of £50,000 a year will be limited to borrowing at 4.49 times their yearly salary.

Nationwide has also changed requirements

Nationwide received praise for its “Helping Hand” mortgage rate, enabling applicants to borrow up to five-and-a-half times their yearly salary.

The company’s criteria have now changed for single applicants and couples.

A single applicant used to qualify with earnings of £31,000 per year; now, a single applicant requires an income of £37,000 each year.

Couples used to qualify with earnings of £50,000 per year; now couples require an annual income of £55,000.

In the mortgage sector, big firms usually set the trend or benchmark, so there is a strong chance other lenders will follow suit in the upcoming months. In a report published by the Guardian in mid-April 2022, they say Barclays and Lloyds Banking Group are likely to announce similar measures.

Bank of England rules on affordability

It is common for lenders to allow mortgages at four-and-a-half times an applicant’s salary. Currently, lenders can only offer 15% of new mortgages at a level equal to or above four-and-a-half times an applicant’s annual income. This is a limit imposed by the Bank of England.

The Bank of England reviewed these limits in 2021 and decided they should stay.

Given the rising costs of living and the financial challenges people face, increased flexibility in the mortgage market is beneficial.

Russell Galley, a managing director of Halifax, said: “Buyers are dealing with the prospect of higher interest rates and a higher cost of living. With affordability metrics already extremely stretched, these factors should lead to a slowdown in house price inflation over the next year.”

You have Credit Issues – Can you still get a mortgage?

If you have marks on your credit profile such as missed payments, defaults or county court judgements, there are lenders available through brokers who provide bad credit mortgages.

How to explore your mortgage options with The Money Hub

If you are looking into taking out a mortgage in 2022, but you don’t devote the time or energy into finding the right deal, you might miss out. Thankfully, help is at hand.

Call The Moneyhub Limited on 0203 725 5830 and speak to one of our highly specialised and dedicated Mortgage Advisors or you can complete an enquiry form which will allow you to schedule a call time.

DISCLAIMER: These articles are for information only and should not be construed as advice. You should always seek advice prior to taking any action.