3 minutes reading time
(670 words)
Property Matters: Rent Never Missed, Mortgage Still Refused
There is something about the mortgage market that, on the face of it, simply doesn't seem to make sense.
Imagine paying £1,200 a month in rent. You have paid it every month for the last five years. No missed payments, no excuses and no problems.
Then you decide you would like to buy your own home.
You find a property, speak to a mortgage adviser and discover that the mortgage repayments could be around £800 or £900 a month.
Surely, having already proved that you can comfortably find £1,200 every month, that should count for something?
Apparently, it isn't always that simple.
This week on Property Matters, Gareth Wax, Hamish McLay and Charlie McKew will be asking whether the way we assess mortgage affordability really reflects the lives people are living today.
The figures make the question even more relevant. Average private rents across the UK are now well above £1,300 a month, with rents in England even higher. For many people, renting is already their biggest monthly expense.
Yet when they approach a lender, their history of making those payments does not necessarily mean they will pass the lender's affordability assessment.
Banks and building societies have to look at far more than the proposed monthly mortgage payment. They consider income, existing debts, credit commitments, household expenditure and how borrowers might cope if their circumstances or mortgage rates change.
There are good reasons for doing that.
Owning a home also brings costs that renting doesn't always bring. The boiler breaks and it is your problem. The roof needs repairing and there is no landlord to call. Buildings insurance, maintenance and unexpected bills all have to be considered.
Nobody wants to return to irresponsible lending where people are given mortgages they simply cannot afford.
Yet there is still an uncomfortable question.
How can somebody demonstrate, month after month and year after year, that they can afford £1,200 in rent and then be told that an £800 mortgage is beyond their means?
Interestingly, the Financial Conduct Authority has recognised this issue. It has heard concerns from people who say the mortgage payment deemed affordable by a lender can actually be lower than the rent they are already successfully paying.
There are also signs that things are beginning to change.
Skipton Building Society's Track Record Mortgage, for example, was specifically created to consider a renter's payment history. Under certain circumstances, applicants can even qualify without the traditional deposit, although affordability and other eligibility requirements still apply.
Rental payment information can also increasingly form part of people's credit records.
Perhaps that points towards a different way of thinking.
A good rental history should never be the only consideration when deciding whether someone can afford a mortgage. Equally, surely years of paying a substantial rent on time should be meaningful evidence of someone's ability and willingness to manage a major monthly commitment.
There is another part of this that deserves discussion too.
If someone is spending £1,200, £1,400 or even more every month on rent, how are they supposed to save the tens of thousands of pounds they may need for a deposit at the same time?
We seem to have created a situation where some people can afford to live in a home, can prove they can pay for that home every month, yet still struggle to convince the system that they can afford to own one.
So this week on Property Matters, we want to ask a very simple question.
If the rent has never been missed, should that count for more when somebody asks for a mortgage?
Join us live on Tuesday at 1pm as we discuss Rent Never Missed, Mortgage Still Refused and ask whether mortgage affordability needs to catch up with the reality facing today's renters.
Watch live or catch up afterwards:
https://www.youtube.com/@SpillingTheProper-Tea
For Property Matters enquiries:This email address is being protected from spambots. You need JavaScript enabled to view it.
For podcast/media enquiries:This email address is being protected from spambots. You need JavaScript enabled to view it.
Imagine paying £1,200 a month in rent. You have paid it every month for the last five years. No missed payments, no excuses and no problems.
Then you decide you would like to buy your own home.
You find a property, speak to a mortgage adviser and discover that the mortgage repayments could be around £800 or £900 a month.
Surely, having already proved that you can comfortably find £1,200 every month, that should count for something?
Apparently, it isn't always that simple.
This week on Property Matters, Gareth Wax, Hamish McLay and Charlie McKew will be asking whether the way we assess mortgage affordability really reflects the lives people are living today.
The figures make the question even more relevant. Average private rents across the UK are now well above £1,300 a month, with rents in England even higher. For many people, renting is already their biggest monthly expense.
Yet when they approach a lender, their history of making those payments does not necessarily mean they will pass the lender's affordability assessment.
Banks and building societies have to look at far more than the proposed monthly mortgage payment. They consider income, existing debts, credit commitments, household expenditure and how borrowers might cope if their circumstances or mortgage rates change.
There are good reasons for doing that.
Owning a home also brings costs that renting doesn't always bring. The boiler breaks and it is your problem. The roof needs repairing and there is no landlord to call. Buildings insurance, maintenance and unexpected bills all have to be considered.
Nobody wants to return to irresponsible lending where people are given mortgages they simply cannot afford.
Yet there is still an uncomfortable question.
How can somebody demonstrate, month after month and year after year, that they can afford £1,200 in rent and then be told that an £800 mortgage is beyond their means?
Interestingly, the Financial Conduct Authority has recognised this issue. It has heard concerns from people who say the mortgage payment deemed affordable by a lender can actually be lower than the rent they are already successfully paying.
There are also signs that things are beginning to change.
Skipton Building Society's Track Record Mortgage, for example, was specifically created to consider a renter's payment history. Under certain circumstances, applicants can even qualify without the traditional deposit, although affordability and other eligibility requirements still apply.
Rental payment information can also increasingly form part of people's credit records.
Perhaps that points towards a different way of thinking.
A good rental history should never be the only consideration when deciding whether someone can afford a mortgage. Equally, surely years of paying a substantial rent on time should be meaningful evidence of someone's ability and willingness to manage a major monthly commitment.
There is another part of this that deserves discussion too.
If someone is spending £1,200, £1,400 or even more every month on rent, how are they supposed to save the tens of thousands of pounds they may need for a deposit at the same time?
We seem to have created a situation where some people can afford to live in a home, can prove they can pay for that home every month, yet still struggle to convince the system that they can afford to own one.
So this week on Property Matters, we want to ask a very simple question.
If the rent has never been missed, should that count for more when somebody asks for a mortgage?
Join us live on Tuesday at 1pm as we discuss Rent Never Missed, Mortgage Still Refused and ask whether mortgage affordability needs to catch up with the reality facing today's renters.
Watch live or catch up afterwards:
https://www.youtube.com/@SpillingTheProper-Tea
For Property Matters enquiries:
For podcast/media enquiries:
This Is Your Signal
Some people look at the way things work and accept it. Others look at the same problems and quietly think, there has to be a better way. WiggyWam is being built for the second group - the people, professionals, businesses and communities who believe better connection, clearer communication and smarter ways of working are not just possible, but overdue. Register your interest, tell us what you think, and find out where you fit in:
Stay Informed
When you subscribe to the blog, we will send you an e-mail when there are new updates on the site so you wouldn't miss them.
Comments