Mortgage rates climb as lenders anticipate interest lift

Richard Pike, sales and marketing director at lending and savings technology provider Phoebus Software, highlighted how this dip could impact lenders’ affordability calculations.

“It is interesting to see that consumer borrowing increased whilst savings, which had increased during the pandemic, fell slightly,” he said.

“As people return to ‘normal’ practices the difference between what people spend and what they save is likely to increase.

“Rising prices, especially on energy and fuel, will surely make that gap even wider over the coming months. 

“Then lenders will have to take a long hard look at affordability calculators and the risk that rising household bills have on overall affordability.”

This month, a number of lenders have been stretching their affordability for certain borrowers to 5.5 times income, from the standard 4.5 times income, hence using up more of the higher income ratio cap assigned to them by the Financial Conduct Authority.

Aldermore for instance has increased its minimum income requirement to £60,000 for borrowers so they can access their 5.5 times loan to income ratio.

Halifax has also stretched affordability on a number of its mortgages.

But with savings down, Pike suggested these lenders could look to bring these loan to income ratios back down in the coming months.