One of Britain’s largest banks has cut its how much it will lend via mortgages in a move that will have wider ramifications for the housing market.
Barclays has reduced the amount a borrow can receive as a multiple of their income. This will apply to new customers and even those already part way through the application process.
Experts said lenders have become increasingly nervous about unemployment – fearing a sharp rise in redundancies and a fall in wages when the Government’s income support scheme, known as furlough, comes to an end in October.
As a result, Barclays has slashed how much money it will send to a mortgage application as a multiple of their income. Buyers can now only get a mortgage 4.49 times their annual salary, down from 5.5 times.
Cash-strapped first and second-time buyers will be the hardest hit. Those in the largest and most popular towns and cities often find it difficult to purchase a house that cost less than 4.5 times their income.
Nicholas Morrey, of mortgage broker John Charcol, said there was real concerns about the stability of borrowers’ incomes as a result of the economic fallout from the pandemic.
Jonathan Harris, of mortgage broker Forensic Property Finance, said the cut would have ramifications for the whole market and those looking to take on debt and buy a first or larger home.
He said: “If people cannot borrow as much, the property market will slow down.”
Belt tightening from mortgage lenders is in sharp contrast to house prices as a whole. This week, Nationwide’s index revealed property valuations were at an all-time high.