The Bank of England to cool home loan market by limiting the number of people borrowing four and a half times their income.
New restrictions will mean lenders must limit the number of mortgage loan approvals to high income multiples. No more than 15% of loans can be more than four and a half times or more of a borrower’s income.
The new restrictions start at a time when data from the Halifax shows house prices are slowing. Also the Council of Mortgage Lenders (CML) have revealed that mortgage lending is lower by 5% in August at £18.6 billion.
Gross mortgage lending hit £18.6bn in August, down 5% on July but 13% higher than a year earlier, the Council of Mortgage Lenders (CML) said including first time buyers, home movers, remortgage buyers and buy-to-let landlords.
First time buyers offered discounts
The Conservatives have announced a starter homes plan for first time buyers under the age of 40 offering a 20% discount to the market value when they buy their first home.
If they are re-elected they will also construct 100,000 new build homes on brownfield sites already identified for residential property.
Mr Cameron has said the scheme will be an extension of the Help to Buy scheme. This has assisted 48,393 to become homeowners, made up of first time buyers and home movers.
The starter homes plan would not be available to the buy-to-let mortgage market, foreign investors or flipped round in a quick sale.
In addition help for first time buyers can come from family members as the equity release buyer can access wealth using a lifetime mortgage and gift the deposit on their starter home.
Use of brownfield sites
The starter homes plan is intended to help the one in four young people living at home with their parents unable to buy their own home.
By using brownfield sites no longer used for industrial or commercial purposes, the starter homes plan can realise savings due to the lower cost of land and pass this directly to first time buyers.
Further savings can be made as the new build homes would be exempt from a range of taxes such as the community infrastructure levy and no social housing requirements.
The new build homes would also be exempt from complying from certain building regulations such as the zero carbon homes standard from 2016.
What are your next steps?
Call our LCM mortgage brokers if you are a buy-to-let landlord with a property, remortgaging and want the best mortgage deal, buying your first home or you are planning to move home.
Learn more by using the mortgage monthly cost calculators, property value tracker chart and equity release calculator. Start with a free mortgage quote or call us and we can take your details.
For equity release buyers our London City Mortgage advisers can recommend lifetime mortgages allowing you to receive cash from your home to spend on anything such as repay an interest only mortgage or help your children start or expand a business.
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