There’s something pretty amazing about knowing that you own a slice of the UK. This might explain why us Brits have a reputation of wanting to become homeowners.
However, this long-held tradition may be waning, thanks to a combination of changes in the market and people’s own opinions.
Is the dream over?
A recent survey* conducted for us revealed that 40% of respondents don’t own their home. Of these, two-fifths revealed they would like to be able to buy a house in the future, but they didn’t think they would ever be able to do so.
There are multiple reasons for this: one might be that since the 2008 property market crash and credit crunch, 100% mortgages have pretty much become a thing of the past. Buyers are now expected to have a sizable deposit and this can take a while to save. However, we are seeing an increase in the number of competitive loan-to-value mortgages coming on to the market.
It might also be the case that new rules brought in as a result of the Mortgage Market Review (MMR) this spring are putting some buyers off. Under these rules, lenders must assess “affordability” and do this by questioning buyers on all areas of their finances, including their spending habits. If the lender does not believe that the buyer will be able to manage repayments for the mortgage they want on top of their current spending, they could be more likely to turn their application down.
Don’t be put off
The thing is, the MMR does not have to put you off buying. In fact, it’s there to protect home buyers just as much as mortgage lenders.
By asking you detailed questions about your financial commitments and what you’re regularly splashing the cash on, lenders can make sure that you’re not stuck making repayments you can’t afford. If you were to borrow too much and then not be able to pay it back, not only would it put a tremendous strain on your finances, but it could also mean your home is at risk of repossession.
Before the crash, it was, arguably, too easy for buyers to borrow above what they could comfortably afford, and because some were able to borrow the full value of their property without putting down a deposit, this put them in a risky position if they were then unable to pay it back as they wouldn’t own any of their home.
As every good Girl Guide knows, it pays to be prepared. If you’re thinking of applying for a mortgage, there are steps you can take that could give you the best chance possible of being accepted.
Begin by carefully looking at your spending habits. Is there anything you’re spending too much on that you could cut, such as a monthly trip to the hair stylist or regular visits to the shops to buy new clothes? These are the kinds of spending habits that might stand against you if you’re applying for a mortgage.
It’s also worth being very careful with your finances before you make your application. Do what you can to avoid bank charges and fees, including staying out of your overdraft if possible.
You may also wish to avoid any other form of borrowing in the few months before you apply for a mortgage, as too many credit commitments might make lenders worry that taking on another will overly-stretch your finances.
If it’s your dream to own a house one day, you don’t have to abandon your plans altogether. There are lots of mortgages out there – and one of them could be just what you’re looking for.
*OnePoll questioned a nationally representative sample of 2,000 adults aged 18 and over between 24th September and 3rd October 2014.
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Intelligent Lending Ltd (Credit Broker). Capital One is the exclusive lender.