House prices: NatWest cut shows property is 'increasingly unaffordable'
03-10-2016
Experts say reduction in core loan-to-income ratio for mortgages indicates more buyers are having to borrow higher amounts
The Royal Bank of Scotland subsidiary has reduced the multiple of earnings, either single or joint, from 4.75 to 4.45 for purchases with a 15 to 25 per cent deposit, reports the Daily Telegraph. Across the UK as a whole, the average house deposit is around 20 per cent. The effect could see more buyers unable to move to their chosen area or needing to save a heftier deposit.
Under Bank of England rules imposed in 2014, designed to manage the risk across the banking sector's mortgage activities, individual lenders must ensure they cap the amount of loans offered at above a 4.5 per cent multiple to no more than 15 per cent in any given three-month period.
As such, experts told the Telegraph NatWest's move most likely indicates rising house prices are pushing up the number of applications for mortgages at higher multiples and that the bank is "rebalancing its loan book".
Andrew Montlake, director of mortgage adviser Coreco, said: "We're seeing this from a few lenders. I think that's going to be more of a feature of the market so as house prices continue to rise, borrowers are going to be more stretched because house prices are continuing to rise but wages are not."
The news comes as a separate study based on Land Registry data revealed the scale of £1m-plus purchases in the UK since 2011 and that an increasing number are being completed wholly in cash, which The Guardian says highlights the "widening gap between the housing haves and have-nots".
According to figures compiled by Bower Retirement Solutions, the equity release advice firm, more than 110,000 such homes have been bought in the past five years across England and Wales, with a total of £192.7bn spent. Of these, around a third, or a little more than 32,000 worth £63bn, involved no mortgage.
The figures are a sign of older buyers who have become property millionaires moving home, but also include a large number of houses purchased by wealthy foreign buyers in London. Since 2012, non-doms have been able to invest in UK housing and realise the value of the asset without paying any UK tax.
Of the 32,000 homes bought without a mortgage, almost 23,000 were in London.