Last week, Business Secretary Vince Cable asked banks to reduce the size of mortgages they offer amid concerns of another housing boom.
Ministers want the Bank of England to do more to push banks to accept a new cap on loans to buy a home. Mr Cable believes a limit of three and a half times an applicant’s income would be a stable level to prevent the whole economy destabilising as a result of a boom in house prices in the south of England.
We believe it is a little early to set a cap on the income level needed to apply for a mortgage. There is justification for a reasonable limit, but as every borrower’s circumstances are different the amount a person can afford should be assessed on a case by case basis.
To some extent this is being tested by the recent introduction of the new Mortgage Market Review. According to the Bank of England’s credit conditions survey, the number of mortgage applications failing lenders’ tests has been increasing. We would suggest that we need to see the impact of these stricter affordability rules before the proposed new mortgage cap is considered for implementation.
Correct at time of publication. The views and opinions expressed herein are those of the individual contributor and do not necessarily reflect those of the Chancellors Group of Estate Agents Ltd or its subsidiaries. References to legislation, best practice and other matters with legal implications such as fees, rules and processes are included for information and editorial purposes only and are not authoritative, nor should they be interpreted as advice. When in doubt you should only take advice from an industry professional or solicitor where appropriate. E&OE.
