Mortgage affordability drops to lowest level in 2022

Mortgage affordability drops to lowest level in 2022

Mortgage affordability has dropped to its lowest level in 2022, as the number of lenders offering high loan-to-value mortgages shrinks. 

Data from the latest Mortgage Broker Tools (MBT) affordability index showed that the minimum average loan size offered by mortgage lenders fell to just over £136,000 in July, down from £150,000 in January. 

The maximum average loan offered has also fallen slightly to £270,000 in July, down from just over £274,000 in June.

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At the same time, data from the broker research platform found that the number of lenders able to offer mortgages to customers who want a high loan to income product has fallen from 27 to 22 in just a couple of weeks, indicating that mortgage lenders are tightening their appetite for lending.

MBT’s chief executive, Tanya Toumadj said that it may not be surprising that affordability is taking a hit given the rise in house prices and the onset of the cost-of-living crisis, but it will have a knock-on effect on demand. 

“Experts across the market are predicting house price falls over the next two years, with Capital Economics suggesting as much as a 12 per cent drop in London, and some reports of down valuations emerging already as a result. 

“However, there are contradicting reports that a downturn in the housing market will further reduce supply, which will help to underpin prices,” Toumadj said.

“Whatever happens, there is little doubt that we are entering an interesting and turbulent time for mortgage affordability,” she added. 

MBT launched in 2019 as a platform to raise broker awareness of specialist affordable sourcing in the mortgage market. 

According to MBT, only 58 per cent of brokers search outside of the top 10 lenders while the top lender for affordability is outside of the top 10 lenders in 73 per cent of cases.