Mortgage Lenders Offer Up To Six Times Salary
UK mortgage lenders are offering some first-time buyers home loans up to six times their annual salary. Whilst this good news for some first-time buyers trying to get on the property ladder, some feel it may lead to financially misery as some people buy homes they eventually cannot afford
Housing charities and citizen advice groups have criticised the increased loans and are worried that some buyers will purchase homes they can ill-afford as UK home prices rocket.
Gone are the days when most lenders were only willing to lend up to three times a persons salary as loan amounts increase. Last November saw Abbey announce it would offer mortgages of up to five times a person's salary and this trend has continued with some high-street lenders such as the Royal Bank of Scotland, Northern Rock and the Alliance & Leicester lending up to six times an annual salary.
Lenders, however, countered claims that the rise in loan amounts was irresponsible, citing that buyers had to satisfy strict "affordability criteria" in order to qualify for such loans.
RBS said few would be able to receive loans of six times salary, saying only "exceptional" circumstances would result in a buyer being approved for such a loan.
A spokesman for RBS said: "RBS operates an affordability-based approach to mortgage lending. In very exceptional cases, this approach could mean we may lend up to six times income. However, this would be unusual."
However, some feel the growing amount of money being lent to buy homes may place a severe financial burden on some homeowners.
Archie Stoddart, director of Shelter Scotland, said: "Ordinary families are being forced into taking on the burden of mortgages due to the dire shortage of good-quality affordable rented housing. Shelter Scotland is calling on politicians to fund an extra 30,000 affordable rented home to tackle this."
13th April 2007
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