If you’re struggling to make that first step onto the housing ladder then remarks from the Governor of the Bank of England this week about the UK’s runaway property market may have made little sense.
Mark Carney is worried that the housing market is a threat to the country’s economic stability. So he has announced new proposals aimed at cooling house prices. These include the amount of mortgages that banks and building societies can offer – homeloans pegged at more than 4.5 times a borrower’s income will be limited to 15 per cent of the lender’s total residential mortgages.
In addition, there will be a new, strengthened affordability test in which borrowers will only be allowed a mortgage if they afford to repay it at interest rates 3 per cent higher than today.
However, lenders in Yorkshire say that they have been operating stringent affordability tests for some time now and are confident that people wishing to buy a home or move house have many options at their disposal.
Andy Caton, chief corporate affairs officer at Yorkshire Building Society, says: “We are a responsible mutual lender, which has its origins in organisations that were specifically set up to enable people who had never before been able to own property to gain the finance needed to build their own homes. We are extremely proud of these roots and throughout our 150-year history we have continued to help first-time buyers get onto the property ladder.
“Last year, more than one third of all house purchase residential mortgages completed by the group were to first-time buyers, with lending to those with a 15 per cent deposit or less rising by 38 per cent to £675m. These figures clearly demonstrate our commitment to helping people in Yorkshire to become homeowners for the first time and that continues regardless of any changes in the market.
“In reality, new loans provided at income multiples of 4.5 or higher are fairly modest across the group. We would therefore not anticipate any impact on our support for people who are looking to buy their first home in Yorkshire Building Society’s heartland area and we welcome the Bank of England’s sensible approach to limiting the possibility that the housing market’s current recovery could become a bubble in future.
“The report recommendations published on Thursday will not affect us directly because we already rigorously assess the ability of borrowers to afford their repayments if interest rates were to significantly increase. We take into account a wide number of considerations about any applicant’s ability to afford a mortgage, not just how much they earn.”
The Council of Mortgage Lenders believes that the Bank of England’s proposals are likely to impact the London market more than elsewhere as so many loans in the capital are at high income multiples.
Meanwhile, new figures from the Government have revealed that the Help to Buy scheme has been most popular in Leeds. The Help to Buy equity loan scheme enables people to buy a newly-built home with a deposit of at least 5 per cent of the property price while the Government offers a loan of up to 20 per cent. The rest is covered by a mortgage. Leeds topped the nationwide table for take-up with sales numbering 580 since launch 14 months ago.
Gary Brook, head of corporate communication at Leeds Building Society, says: “Leeds is a large, vibrant city and therefore home ownership is important to those who live here. And there are opportunities for people to get on the housing ladder in Leeds.”
He adds: “At Leeds Building Society, we have had an affordability model since 2012...Our lending started strongly this year and all indicators are that people are getting on the housing ladder.”