Brits' perceptions of the mortgage market are still lagging behind reality, as many believe they are unable to get a suitable mortgage due to lenders keeping a tight hold on lending criteria, according to new research from unbiased.co.uk, the professional advice website.
After a decade of so-called "easy credit", the tightening of lending criteria over the last 18 months has had a lasting effect on the public. Over the last 12 months, perceptions of what people can afford when it comes to income multiples have remained on the pessimistic side, with the average now being placed at just 3.3 times an individual's salary.
One fifth (22 per cent) of Brits think they can only get between 0.5 and 2.5 times their salary and almost a quarter (24 per cent) of Brits believe lenders would restrict a home loan to up to 3 times their salary.
Two fifths (40 per cent) of people believed they need at least a 20 per cent deposit or more in order to secure a mortgage in the last 12 months.
"The mortgage market has experienced tremendous change and after an initial tightening of lending criteria last year it is understandable that many consumers still believe this to be the case and are confused as to what is now available to them,” said Karen Barrett, Chief Executive of
unbiased.co.uk.
“It is not surprising that many potential homeowners have taken a pessimistic view of lending criteria, deposit size and what income multiples are available to them. However, in reality many lenders are now relaxing their lending criteria, offering now around four times or more an individual's income.
It will be interesting to see whether public perception will keep up with these developments. Lenders have also recently re-entered the high loan-to-value space, meaning that borrowers do not require such a large deposit in order to get an affordable mortgage.
“An increasing number of lenders are now offering 90 per cent LTV deals, meaning especially first time buyers who were previously priced out of the market can now look to see whether they can access an affordable deal.
"While we haven't returned to a period of ‘easy credit', there is now a much higher quantity of affordable mortgage deals on the market place. We urge consumers to visit a whole of market mortgage adviser to dispel the myths and get the best advice on their mortgage options.
Many may be unnecessarily putting off buying a property due to their belief they cannot obtain their required mortgage. A whole of market mortgage adviser can look at all the mortgages available and find the best deal not just by rate but also by income multiple and deposit size.”
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