Mortgage rules change for first-time buyers.
Bedfordshire Starter Homes are 40.1% Cheaper Today Than in 1989 and with changes in the mortgage market from next month we will see first-time buyers (and thousands of other homeowners) have access to mortgages that will allow them to buy their dream home.
Even though the average value of a Bedfordshire first-time buyer property has risen by 261.2% since 1989 to ยฃ295,350, the monthly payments Bedfordshire first-time buyers must make on their mortgages as a proportion of their take-home pay is 40.1% less today compared to 1989.
Today, according to the Nationwide Building Society โฆ
the average Bedfordshire first-time buyer only needs to pay out 33.3% of their household take-home pay on their mortgage payments, compared to 55.6% in 1989 (i.e. two fifths less).
You might say 1989 was 33 years ago, a long time ago and not relevant to today. I would agree.
So next, I looked a little closer to home, and in 2007 โฆ
the average Bedfordshire first-time buyer had to spend 44.1% of their household income on mortgage payments (i.e. 24.5% proportionally cheaper than today).
So why do I say all these things?
Last month, the Bank of England revealed that its Financial Policy Committee would be removing their mortgage market affordability test on people taking out mortgages in August.
The test was introduced in 2014 to ensure the UK didnโt have a repeat of the 2008 Credit Crunch and particularly hit first-time buyers with what they could afford to buy.
This rule change means Bedfordshire property buyers could soon be able to borrow thousands of pounds more and purchase larger homes.
The decision to withdraw the affordability test certainly raised eyebrows in the press, primarily as the Bank of England has raised interest rates five times in the last six months to try and reduce rising inflation. Yet, as stated in the first part of this article, Bedfordshire first-time buyers are comfortably paying their mortgages compared to previous years therefore - everything should be ok with this rule change.
The old rules tested home buyers on mortgage repayments if interest rates rose to 6%/7%, yet the Bank thought that rule was too harsh.
Not all rules have been changed, as the important Bank of England โloan to income ratioโ stays put.
The Bank were keen to stress that the mortgage market was not going to turn into a free-for-all as it did in the mid-2000s when the likes of Northern Rock were offering 125% mortgages, and a sixth of all UK mortgages were given without proof of income.
I believe it will have a progressive effect on the Bedfordshire property market.
๐๐๐ง๐ฒ ๐ญ๐๐ง๐๐ง๐ญ๐ฌ ๐ฐ๐ก๐จ ๐ก๐๐ฏ๐ ๐๐๐๐ง ๐ฉ๐๐ฒ๐ข๐ง๐ ๐ซ๐๐ง๐ญ๐ฌ ๐๐๐ซ ๐ฆ๐จ๐ซ๐ ๐ญ๐ก๐๐ง ๐๐๐ญ๐ฎ๐๐ฅ ๐ฆ๐จ๐ซ๐ญ๐ ๐๐ ๐ ๐ฉ๐๐ฒ๐ฆ๐๐ง๐ญ๐ฌ ๐๐จ๐ซ ๐ญ๐ก๐ ๐ฌ๐๐ฆ๐ ๐ก๐จ๐ฆ๐, ๐๐ฎ๐ญ ๐ก๐๐ฏ๐ ๐๐๐ข๐ฅ๐๐ ๐๐๐๐จ๐ซ๐๐๐๐ข๐ฅ๐ข๐ญ๐ฒ ๐๐ฌ๐ฌ๐๐ฌ๐ฌ๐ฆ๐๐ง๐ญ๐ฌ ๐ซ๐๐ ๐๐ซ๐๐ฅ๐๐ฌ๐ฌ, ๐ฐ๐ข๐ฅ๐ฅ ๐ง๐จ๐ฐ ๐๐ ๐๐๐ฅ๐ ๐ญ๐จ ๐ ๐๐ญ ๐จ๐ง ๐ญ๐ก๐ ๐ฉ๐ซ๐จ๐ฉ๐๐ซ๐ญ๐ฒ ๐ฅ๐๐๐๐๐ซ.
The rule change should open the Bedfordshire property market up a little more and allow house prices to grow in Bedfordshire.
I advise anyone who has been refused a mortgage on affordability in the past to speak to a mortgage arranger. If you don't know of one, drop a message to me, and I will give you details of mortgage arrangers you could talk to.
