The average maximum loan available to mortgage borrowers dropped to a record low in January, according to Mortgage Broker Tools’ affordability index.

The average maximum loan available to homebuyers across the whole of the market fell to £234,224, a 12 per cent fall from January last year and a drop of almost 14 per cent from last September’s peak.

First-time buyers were squeezed the hardest, with their average available maximum loans falling to £230,555 in January this year, compared to £264,411 in January 2020, a decrease of nearly 13 per cent.

However, the picture for self-employed people seeking mortgages is more stable than anecdotal evidence often suggests, says the monthly report, which separates out data for this group for the first time.

The average maximum loan offered to self-employed applicants was £221,400 in January 2021 this year, a fall of just over 3 per cent from last August’s peak.

Also, the minimum average loan available to the self-employed recovered to £118,800 in January. This is a jump of 45 per cent on its lowest point last April, and a rise of just over 43 per cent from November.

Mortgage Broker Tools chief executive Tanya Toumadj says: “One of the trends we have noted in tracking affordability over the last year is that affordability has become a key lever for lenders in controlling business volumes. Traditionally rate has been changed by lenders as a means of growing or tempering lending levels, but increasingly lenders are also using criteria and affordability calculations.”

Toumadj adds: “Through the second half of 2020, when customer demand was high and lender service was under pressure, we saw around three to five changes to affordability calculators every week. The record low maximum loan amount available in January reflects this ongoing dynamic and the mounting pressure on lenders as we approach the scheduled end of the stamp duty holiday.”

The Mortgage Broker Tools report also points to a Moneyfacts survey earlier this month, which says that the number of mortgages available on the market is widening for brokers and clients looking for loan options.

The number of mortgages on the market rose to 3,215, according to Moneyfacts – the widest choice seen since March 2020’s count of 5,222.

It is also the largest four-monthly rise, at 42 per cent, (counted from October 2020) since 2007.

Toumadj says: “Brokers should not be disheartened when it comes to finding the right solutions for their clients. The latest data from Moneyfacts has reported that product choice has increased by 42 per cent since October and is now at its highest level since prior to the first lockdown.

“Our data shows there is a suitable affordability option for 80 per cent of all cases and so, while the average trends may be down, there are still lenders that want to, and are able to, lend the loan amount requested by most clients.”