Mortgage affordability has fallen to its lowest level in 2022, according to Mortgage Broker Tools.
The broker research platform’s latest affordability index shows that the minimum average loan size offered by mortgage lenders fell to just over £136,000 in July, down from £150,000 in January, a fall of 9.3%.
The maximum average loan offered has also slipped to £270,000 in July, down from just over £274,000 in June.
The platform adds that its analysis of different customer profiles shows that the number of affordable lenders able to offer mortgages to customers who want a high loan to income has fallen from 27 to 22 “in just a couple of weeks”.
It says this indicates “that mortgage lenders are tightening their appetite for lending to those customers who want to borrow higher income multiples”.
The data comes as the current average cost of a home lifted 7.8% to £286,397 in the year to June, according to the latest Halifax house price data released last month.
House prices have climbed this year even though the Bank of England lifted interest rates by 50 basis points to 1.75% last month, its biggest hike since 1995, which raised the base rate to a fresh 40-year high. It was the sixth rate rise since last December.
The move by the central bank comes as it battles rising inflation, which stood at 9.4% in June, which the BoE forecasts will hit 13% by the end of the year.
Mortgage Broker Tools chief executive Tanya Toumadj says: “Having watched house prices rise sharply, in addition to seeing the onset of an acute cost-of-living crisis, it might not be surprising that affordability is taking a hit.
“However, all of these factors are also likely to have a knock-on effect, with potential buyers struggling to afford to enter the property market, therefore lessening the high pressure created by recent surges in demand.
“Experts across the market are predicting house price falls over the next two years, with Capital Economics suggesting as much as a 12% 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.”
