The current headlines are all centred round a booming housing market fuelled by first-time buyers, but there are still many people concerned about their chances of getting on the housing ladder.
With house prices rising in most areas, raising a large enough deposit is becoming an increasing challenge, according to the Building Societies Association's (BSA) Property Tracker Report, which found that 63% of consumers feel this is the biggest barrier to buying their own home.
Mortgage finance is the second biggest worry with 46% concerned as to whether they will be approved for the amount they need. The Government's Help to Buy scheme has been helping tens of thousands of people onto the property ladder, improving availability of 95% mortgages, but thoughts are turning not just to whether people can get a mortgage but to whether they can sustain the payments.
This is where new rules from the Financial Conduct Authority's (FCA) Mortgage Market Review (MMR) come into play. These impending changes, due to come into force on 26 April, will see lenders becoming fully responsible for assessing whether the customer can afford the loan. To do this they will have to look into the customer's finances very carefully, verifying their income and taking into account all outgoing expenditure.
This tightening in credit approval criteria is likely to affect around a million home-buyers this year and may mean it is a lot harder for people to get the credit they need, but Paul Broadhead, BSA Head of Mortgage Policy, explains why it doesn't have to be prohibitive but can be taken as a common sense approach.
He says: "All applicants, bar a very few specific groups, will receive mortgage advice. Whilst this means that the mortgage application process will take longer than before, consumers will benefit from the advice on what is probably the biggest purchase of their lives. Similarly applicants should expect to provide more details of their income and expenditure.
"A new feature is the requirement for a lender not only to establish that a borrower can afford the loan at the current interest rate, but also if the rate were to rise. Overall, whilst some people may not be able to borrow as much as they expect it does not mean that those on lower incomes or those with smaller deposits will be frozen out of the property market. What it does mean is that lenders will continue to take a common sense approach to mortgage lending."
With the biggest risk to the housing market being cited as interest rate rises and 29% of people saying they are wary of a hike, it is understandable that something needs to be done to make sure people do not get into difficulty later on. If the bank rate was to rise by 1%, then 14% of home owners say that making mortgage repayments would be difficult and responses from first-time buyers suggest this group would find it the hardest, with 29% stating they would struggle to pay the mortgage and 20% saying they would have to cut other spending to make ends meet.
Happily not everyone is feeling the pinch and 42% of people questioned said they wouldn't be affected by an interest rate rise, while a further 20% would actually welcome it as they would benefit from an increase in interest from their savings.
Despite the many fears people have over the housing market at the moment, 40% of people still agree that now is a good time to buy a property, maybe to get ahead of any more price hikes and to take advantage of the availability of mortgages out there, and perhaps, just to make that dream home a reality at last.
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