Cautious mortgage lending could dampen property market

mortgage lending

Research is suggesting that mortgage lenders are imposing tougher requirements, which could stifle sales

Increasingly cautious mortgage lending could dampen the property market and cause more sales to fall-through, it has been warned.

Recent house price data has shown record property values but other research is also suggesting that mortgage lenders are imposing tougher requirements, which could stifle sales.

Analysis by fast sale firm Quick Move Now has found that 32% of property sales collapsed before completion between January and March of this year.

Of the sales that failed, 25% fell through because the buyer struggled to secure mortgage finance.

Danny Luke, managing director of Quick Move Now says this suggests that lenders are beginning to show more caution in light of rising interest rates and living costs.

He adds: Property prices have been climbing and climbing in recent months. At the same time, the UK has been experiencing a steep rise in inflation and lots of people are beginning to really feel the pinch from steep rises in the cost of living.

From our conversations with potential buyers and estate agents, it is clear that lenders are being more cautious about which properties they’re prepared to lend on and how much home buyers can afford to borrow in light of rising day-to-day living costs, he says.

Energy prices have already risen by 50% for most UK households, and they look set to increase even further through the latter half of this year and into 2023. That, of course, has a significant impact on homeowner affordability, he says.

Other reasons for transactions collapsing included the buyer changing their mind, the seller pulling out due to slow progress or a change or circumstances.

There have also been reports about an increase in mortgage downvaluations.

Vadim Toader, chief executive of alternative lender Proportunity has similar concerns.

He says: Lenders rightly want to ensure that those applying for a mortgage can afford their repayments. However, with the cost of living rising, it is difficult to predict how new buyers’ ability to pay their monthly mortgage will be impacted.

He says: We are in a state of flux, as energy prices only increased on 1st April, meaning many applying for a mortgage may not be able to accurately estimate their monthly outgoings.

Disclaimer: The opinions expressed by our writers are their own and do not represent the views of Getting Money Wise. The information provided on Getting Money Wise is intended for informational purposes only. Getting Money Wise is not liable for any financial losses incurred. Conduct your own research by contacting financial experts before making any investment decisions.

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