Banks have massively reduce what I can borrow

[greylaptop]

Has anyone else got any ideas why this might be. I have a perfect credit score and nothing has changed but 6 months ago I was offered a £600k mortgage and now it been dropped down to £550k is this normal? I know they change all the time but seems quite a lot.

The bank said they couldn't tell me why. It's really going to affect me as house prices have gone up so much in my area.

What income multiple was £600k? Was that 5.5x your salary?

There were income multiple drops when Covid hit; and there’s now interest rate fears which will affect affordability calculations… but we can’t tell which is likely to be affecting you, without more info.

Yes it was approx 5.5 x the salary. It was about 6 months ago with a £200k deposit. Shocked i how much it's gone down but I'm not familiar with how it all works.

Banks don't want to lend as much at the moment, the economy is not growing as much as expected, there will likely be an interest rate rise before the end of the year and possibly 2-3 next year.

5.5 is also a high multiple, even for a high earner, normal is around 4.5-5.0 and banks are reducing their exposures, they are also limited on how many borrowers they can lend to more than 5.0 times income.

I think earlier this year they were forecasting that interest rates were not going to go up. However the recovery has slowed and they are now forecasting rates to rise in 2022. Maybe they think that makes a difference to your ability to repay? I don't work in finance or anything so I could be completely wrong.

Oops, cross posted with Matilda. I agree with her.

Thanks that makes sense. On that basis would it be better to hurry about and take a mortgage out?! Could possibly drop even more then

@greylaptop

Thanks that makes sense. On that basis would it be better to hurry about and take a mortgage out?! Could possibly drop even more then

That entirely depends on your circumstances, you need to find the right home to buy to get a mortgage, I would say finding the right home, even if it is £100k less than your maximum borrowing is more important that finding somewhere just because it means you can max out your borrowing. Also factor in that with every month an income of £100k pa should mean you are saving more towards your deposit, so a delay might not be a bad thing overall.

I would also say it depends on your longer term prospects. Interest rates are going to rise, but not a huge amount, how do you feel about your financial position, monthly repayments and also time to repay with the possibility of overpaying based on current circumstances, plus also with interest rates being 1-2% higher than they are now? I don't think they will rise more than 1%, but that does not mean you should not plan for a bit more when your initial period ends.

It might well drop more, it might go down to 4.5 times your income, potentially lower, but again, buy the right place for you, not the most expensive home you can possibly afford.

Unfortunately we aren't saving anything because we are renting and it's more expensive than the mortgage hence why we want to buy, we've watched as house prices have gone through the roof and our deposit has gotten a lot smaller over the last year.
Prices are still going up where we live as there aren't enough houses coming on it's been a bit of a nightmare.

Job is very secure and has been confirmed by my company. Income should go up but if borrowing ability goes down I imagine this will then counter what I can buy. Only waiting because can't find a good house to buy. Will keep an eye on the rates thanks.

Same happened to us more or less. We found we could borrow £100k less this month than in August (89% of what we’d been offered before, your being offered 91%). I’m pretty sure it’s tightening based on on less confidence in the economy. It’s really frustrating given rising prices but not much we can do. We’d all prefer prices to be at 2019 levels and not to have to borrow as much but the ship has sailed… 😢

The max my bank offered was 4.75 of salary and that was pre-pandemic. I think lending 5.5 is irresponsible personally.

Well it is 5.5 x my salary was not including bonuses which are pretty much guaranteed and my company have said they'll at least guarantee my basic annual bonuses if I need to in writing for a mortgage so in my case was well within affordability plus my salary is expected to rise fairly substantially over the next few years so I suppose I've just been caught in the middle of the not so great outlook for mortgages right now.