Posted on 12 December 2012 by
In what’s sure to start an interesting debate, a building society has claimed that if lenders (the high street) don’t get rid of their “computer says no!” approach to mortgages, the average age of a First Time Buyer will increase to a staggering 40 by 2020. This could be a double-whammy, as many of the computer led lenders still maintain 65 as the date we must all retire, so a maximum term of 25 years is all they could take as well!
Affordability quite rightly has become the way lenders assess mortgage applicants, yet almost every lender has a different way of doing so. Too many changes of addresses or employment, too much credit, not enough credit, not being on the voters roll, having an overdraft, using your overdraft, and having children, can all have a negative impact on your computer driven application. Common sense only sticks its head above the parapet at 60% Loan to Value, and sometimes not even then.
A big part of the problem would also appear to be that in 2001 the average cost of a property was approx £122,000 and the average salary £16,500. In the blink of an eye, 2012 arrives and we find the average house price has rocketed to £236,500 an increase of 94 per cent, while the average salary is only £21,300 up a measly 29 per cent. The cost of living just adds to the problem as it’s now five times higher than the average wage increase, and the average family is reckoned to need an extra £1,000 just to maintain 2011’s standard of living. Throw in the government’s austerity measures, and it’s a pretty bleak picture for First Time Buyers.
However there are some lenders out there who like the 7th Cavalry are riding to the rescue of the besieged homesteaders. Only this week 2 new 95% Loan To Value products have arrived on the scene, with one in particular worth a mention. Rather than the usual impossibly tough credit score to deal with, their principal criteria is that the borrower has been renting for the past 12months. Their rational is that, if the applicants can demonstrate that they are already capable of running a household and paying rent every month, they are just as likely to able to do so with a mortgage, even more so if the two sums are similar. They reason that many people who are currently renting could afford a mortgage, but don’t have the levels of deposit that most lenders require to get the best rates, or to get through the lower credit scores.
Once again it demonstrates that if you want a mortgage (and before you’re 40), then a broker is your best solution.
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