The £200,000 gap between what lenders’ calculators say you can borrow
We entered details of a fictional typical first-time-buyer couple into 10of the high street’s biggest mortgage lenders’ online calculators to find out how much they could borrow.
Based a joint income of £75,000 and a deposit of £25,000 we uncovered a near £200,000 difference between the most and least generous indicative maximum loan amounts.
For those who do not shop around and realise they could borrow what they need at other lenders this could seriously dent their aspirations.
The rise of mortgage lenders’ affordability calculators has seen most banks and building societies direct those looking for a home loan to them, to see what they can borrow.
Yet the gulf between these indicative sums across lenders is huge.
Accord Mortgages emerged as the most generous lender with a maximum loan amount of £411,750, while HSBC stood out at the most stingy by offering to lend just £225,000.
While some would argue that the lower amount is more sensible, the staggering £186,750 difference between the two amounts is more than enough to buy a property with extra bedrooms, a garage or a better location.
The calculators don’t give the definitive answer on the sum borrowers can get but are promoted as a guide and useful tool for prospective buyers. Some differences can be explained by different bank’s policies but the £200,000 gap begs the question of why such a huge difference?
A HSBC spokesperson said: ‘The calculator is only an indication and we assess mortgage affordability on a number of factors including the customer’s net income, the customer’s committed expenditure and basic essential expenditure such as living costs.’
Our research also revealed a sizeable gap of £34,750 between YBS’s indicative upper limit and the next best from Skipton Building Society, whose calculator says it would lend up to £377,000. Making up the rest of the top three most generous loan amounts was Nationwide at £356,300.
In fact, the rest of the top nine – Halifax, Clydesdale Bank, Principality, Barclays, Santander and RBS/NatWest – all came in with maximum loan amounts exceeding £318,000.
Even excluding the bumper YBS offer, the difference between the second-biggest loan amount and the ninth was still £58,300.
Yet, they all offered at least £93,000 more than HSBC’s measly offer of £225,000, which is the equivalent of a loan-to-income multiple of just 3 – even though mortgage providers are allowed to lend at 4.5 times income to 85 per cent of borrowers each quarter.
Clydesdale Bank, Principality and Barclays all gave loan amounts at around 4.5 times income, with Virgin Money’s best offer of £237,500 closer to HSBC’s tight-fisted ways, with a loan-to-income of 3.17.
At the other end of the spectrum, Yorkshire Building’s Society’s bumper indicative loan amount of £411,750 works out at a loan-to-income of 5.49.
Though few first timers would be likely offered this loan size as mortgage lenders are only allowed to lend at a loan-to-income above 4.5 to 15 per cent of customers every three months.
Of course, the lenders offering lower loan-to-income multiples can argue they are lending responsibly by making sure borrowers aren’t overstretching themselves.
Article taken from www.thisismoney.co.uk
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