Mortgage affordability plunges to lowest level in 2022

Lenders are tightening their appetite, according to broker research platform

Mortgage affordability plunges to lowest level in 2022

Mortgage affordability has dropped to its lowest level in 2022, with the average minimum and maximum loan size offered by mortgage lenders both decreasing.

According to the latest Mortgage Broker Tools (MBT) Affordability Index, the minimum average loan offered to mortgage clients fell to just over £136,000 in July, down from £150,000 in January, while the maximum average loan offered also dipped slightly to £270,000 in July, down from just over £274,000 in June.

Analysis of different customer profiles by the broker research platform also showed that the number of affordable lenders able to offer mortgages to customers who want a high loan-to-income has fallen from 27 to 22 in just a couple of weeks. MBT said this indicates that mortgage lenders are tightening their appetite for lending to those customers who want to borrow higher income multiples.

Read more: Maximum and minimum loan amounts wider than ever – MBT.

“Having watched house prices rise sharply, in addition to seeing the onset of an acute cost-of-living crisis, it might not be surprising that affordability is taking a hit,” Tanya Toumadj (pictured), chief executive at Mortgage Broker Tools, said. “However, all of these factors are also likely to have a knock-on effect, with potential buyers struggling to afford to enter the property market, therefore lessening the high pressure created by recent surges in demand.

“Experts across the market are predicting house price falls over the next two years, with Capital Economics suggesting as much as a 12% drop in London, and some reports of down valuations emerging already as a result. However, there are contradicting reports that a downturn in the housing market will further reduce supply, which will help to underpin prices.”

Toumadj added that there is little doubt that we are entering an interesting and turbulent time for mortgage affordability.

“As proven time and again throughout the unpredictable pandemic years, the answer to ensuring a client gets the best deal in a complex environment is comprehensive research and reliable data, backed up by technology,” she said.