To ask why we were declined a mortgage agreement in principle

[ChickenChickenHen]

Slightly perplexed. We just applied for a mortgage agreement in principle with our bank. We need a loan of just under 3.5 times my partner's salary (I'm a SAHM). We thought this was fairly conservative. Just discovered that the most they can offer is only 2.25 times his salary! We checked with another bank and they offered slightly more but still only 3 times salary, so not enough.

We have a huge deposit (63% of property price), no debts, excellent credit scores (just soft checked), very secure income. We do have two kids but outgoings fairly low.

Now obviously I know about the disaster budget and the cost of living etc, but my understanding was that 4-4.5 times salary was still typical. Is that wrong? Is it just for people without dependents?

We asked the bank for an explanation but they just gave us a rote statement about affordability that didn't explain anything. Maybe this is normal and we will just have to wait for prices to fall, but any insights would be gratefully received

And definitely get a will. You don’t automatically inherit if not married.

sorry but neither of us remembers, we ended up buying a cheaper house so didn’t need pushing for bigger mortgage. We were similar as I was SAHM but with one older child, maybe it affected the situation but in a chat with mortgage advisor (he was very chatty while he did all the printing) I’ve got the impression that online was always bigger as it’s got less details.
By the way you’ve said that you are not sure now about the amount you want to borrow. Our bank used 8% stress test to check that we would be able to afford higher rates. It was in 2018-2019 so I could imagine now it should be higher. We had an option to buy a more expensive house but decided against. The main reason was that we were cautious, and I was very glad about it last year when we were remortgaging. Of course it depends on your personal circumstances, it just my approach.

@pizzaHeart no I completely agree I'm also very cautious. Not used to being told no, because I usually play it very safe. 8% would be a bit of a squeeze for us, 10% would be grim! I'm definitely rethinking the amount we should borrow.

Following for ideas, 6 of us on one salary here and we were only offered 2 times DH salary ☹️

I genuinely think the only way to do it is to get a job

That's a lot of dependents. If it's at all possible to work then I think that's the best solution.

Halifax have just offered us a 4x mortgage through a broker with the same circumstances as you. SAHM, two children, no childcare costs and I’m not on the mortgage but a 20% deposit! I think the broker is the key!

Were you both going to be on the mortgage? When I checked what we could borrow using HSBCs checker then we couldn't borrow as much with me on the application as I was a SAHM and earning 0. If we put DH as the sole applicant (still declaring children etc accurately) they were happier to lend more! I think the unemployed adult spooks their algorithm.
We always use a broker anyway (we don't pay the fee, they get it from the bank).

We had this years ago as well, even before the cost of living stuff.

It's because there is only one earner and lots of dependents.

In terms of affordability much will depend on when you are going back to work

I was on a career break, so knew exactly when I was going back and how much I was going to earn.

So knew that there was wriggle room at a point I'm the future

I also remember being surprised because when we bought first place both earning before kids we were offered over 5 times joint.

Which seemed ridiculous

Nobody should ever be offered more than 3 x salary or joint salary. Mortgage rates were over 16% in the 1980’s, and there is no guarantee they won’t get to that level again. Having worked in mortgages at the height of the last house price crash (1989) and seeing the horrendous costs of repossessions on the families that had either lied about their income or had been persuaded to do so by unscrupulous mortgage brokers, I would advise you to purchase a lower priced property for now.

Yes. Some of the blame has to go to unscrupulous lenders. They're supposed to be the experts so of course people will think it's feasible if the big, money-driven bank/building society says so.

Never go to your own bank for a mortgage!

Banks make money by using a mortgage as a vehicle to sell you other financial products.

If you arent a family with other credit then they will see you as a poor prospect for being able to sell you loans etc.

Go to a full market broker.

In the long term have a credit card each, spend a little and pay off each month- dont get into debt but having more credit improves your credit rating over not having any! Bizarre but true!

Was this recently though? Currently climate with high interest rates is very different!

We've just remortgaged with a rate of 3.94% with 50% equity. On our paperwork they've stated that interest rate is variable once fix is over and quoted if rates rise to 9.4% then you'll pay this much. If they're stress testing to this level or above, that could be a reason.

We didn't take out the max we could when we were offered a mortgage 5 years ago. I think we borrowed about 3x our salary.

We recently got a mortgage in principle for just under 4 times salary with a 69% deposit .

Watch "moving house with Charlie" on youtube or/and follow him on Twitter

Lots of info on what's actually happening in the property markets atm

They examine your monthly expenditure as well as salary. You need to cut back and show a regular monthly excess income over expenditure. Look at your direct debits, any gym membership etc that you can drop temporarily.

We never had an issue with DH getting 4x with one income and two children (both in nursery at the time).

Use a good broker.

I think it’s because we are heading towards a recession. You haven’t mentioned what your husband does, but I don’t think any job is that secure at the moment.

No sector is safe. I work in Education and we’ve had some serious discussions during budgets as we simply cannot afford to pay for all our outgoing. Gas and electricity is 100-150% higher than 2 years ago. Wages have gone up twice by the biggest inflationary increase I’ve ever witnessed and it’s not fully funded. I think my point is, the banks clearly know this isn’t going to improve.

The rise in interest rates hasn’t had the outcome the Bank of England hoped for as inflation is still rising, so they will continue to rise the rate of borrowing until inflation starts to fall. Therefore lenders are clearly making allowances for this. What you have to consider is what the interest rate might be the next time you renew. You may be able to afford the mortgage now but if it rose to considerably more. I have a 5 year fixed rate and it’s definitely something I’ve thought about, but both me and my husband work, and I am making overpayments on my mortgage because I am terrified of the prospect of what I may have to pay in interest to keep my house the next time we renew. The more I can pay off, the less I’ll be borrowing.

As others of said, the only way to increase your borrowings is to increase your income and 2 pay cheques is better than 1 right now. That, or accept at this moment you can’t borrow as much and cut your cloth accordingly. X

You need an income too basically.

As interest rates mortgage multipliers are going to fall. We are just coming out of an unprecedentedly long period of low interest rates this is unlikely to happen again.

Interest goes up
Mortgage payments rise
Multipliers of salary fall

We used a broker, he got us a better interest rate than the bank we’re actually advertising. They can see and get deals seen only by brokers. I would advise you speak to one. Our
first mortgage I was self
employed and my partner was zero hour contract and we got a mortgage through our broker. They’re worth their weight in gold.

Why do MNetters always name check London and Country? I thought they were shite - massive, impersonal and patronising. I went with a local broker, who knew the market in my area- much better ( and got me a much bigger mortgage offer than L& C who offered a pitiful amount. )

Last year we got 4.5x joint salary, 3 dependants, 7% deposit and 39 year term. I think what helped us was the house we bought was about 20% cheaper than the houses surrounding it and we used a local broker, who put in a lot of leg work for us.