What are the three biggest factors that influence a Mortgage?

So, when it comes to affordability for a mortgage, it’s important to understand that it is a very fast-paced landscape with a lot of moving pieces. Therefore, there are often situations where things change quite rapidly.

As an example, back in February of 2022, there was the biggest reduction in 18 years as a result of 518 mortgage types being discontinued.

Naturally, there are a couple of different reasons for this. The Bank of England raised their rates quite a bit at the time, which meant that many lenders had to ensure their mortgages remained viable by jettisoning things that were no longer practical.

When exploring mortgages, it should be noted that there are three primary factors which influence mortgage availability. These factors can make the difference between rejection and approval for applicants.

The first factor is the mortgage affordability test.

Back in 2014, the Financial Policy Committee brought in two primary recommendations. These were a direct attempt to make sure that the financial collapse of 2007 to 2008 never happened again. However, the most controversial part of this was the mortgage affordability stress test.

This test was a recommendation that mortgage lenders used to check the ability of the borrower to pay at a stress-interest rate. This interest rate is typically three percentage points higher than the average rate that the mortgage would be out. This means that if there is a sudden increase in mortgage rates, the borrower can still afford to make the payments.

The second main criteria is the loan to income flow limit.

This is the ratio between the average income of the household against the overall amount that is to be borrowed. To put this into simple terms, imagine that the average salary in the UK was £29,600. If somebody with that salary tried to purchase a house that had a price of £348,804, then the loan to income flow limit would be 8.48%.

Generally, this limit is capped at 4.5%, with the ability of the lender to approve mortgages that have a higher limit than this restricted to roughly 15% of overall lending. It is worth noting that the bulk of people are not buying a property by themselves, nor with the loan that they take out 100% of the asking price. Furthermore, most will not be buying the exact average property.

It’s probably worth noting that Income is not the sole deciding factor when it comes to a mortgage. Financial circumstances, credit history, spending habits, and your credit score each have a unique impact on your chance to secure a mortgage. Furthermore, your appearance in the electoral role and whether or not you’re self-employed also play a role in deciding what kind of mortgage you can get.

The final factor when considering affordability for a mortgage is to work out whether or not you can get access to a mortgage is your deposit.

The bigger your deposit is, the more favourable a mortgage rate you can get. However, once you get past the 25% deposit mark, this rate can vary substantially.

For more information about any of our services, or if you have any questions about affordability for a mortgage, get in touch by calling us on 0203 3939 222.

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Hannah D
Hannah D
07:42 09 Sep 19
I would fully recommend Greg and Greenacre Financial Services. As a first time buyer I was daunted by the process of... finding the right mortgage for me however Greg made the process really simple, clear and quick. He was always available to answer any questions and happy to explain everything. I wouldn’t hesitate in recommending Greenacre FS to my friends and family.read more
Jessica Cohen
Jessica Cohen
19:33 26 Aug 19
We first met with Greg in May for advice as we had adverse credit and irregular pay and didn't think a mortgage was in... our reach. Less than two weeks later Greg had fully arranged a great deal for us on our first mortgage. He was available whenever we needed him, 7 days a week and in the evenings. We cannot thank Greg enough for helping us buy our first home!read more
Seren Fletcher
Seren Fletcher
08:56 24 Aug 19
Would highly recommend Greg and Greenacre Financial Services. Was extremely professional and helpful. Our mortgage... wasn’t straight forward due to my husband being self employed but Greg was very knowledgable and managed to find us a really good mortgage. Looking forward to working with him again in the futureread more
13:24 23 Aug 19
Graham at Greenacre was excellent in helping me get a mortgage for my house purchase. He was always available when... needed, provided an efficient service and was very knowledgeable. Highly recommended!read more
Ian Hatter
Ian Hatter
11:07 16 Aug 19
What can I say, Greg has been absolutely amazing in sorting out a mortgage for me I never thought was possible. It has... meant I have been able to buy a house, a few months ago, I would never have dreamed of being able to buy after talking to high street lenders. He worked exceptionally hard and always kept me updated with every step of the process. Buying a house is extremely stressful, but Greg took all that stress away from me. I cannot recommend Greg enough to anyone looking to buy a property. Thank you so much for your help Greg, it's greatly appreciated.read more
Sean Kelly
Sean Kelly
15:27 30 Jul 19
10/10 EXCEPTIONAL service and result. Highly recommend. Greg and the Greenacre Financial Services team were fast,... knowledgeable, and honest. All the qualities you want and need. Very pleased I was recommended to Greenacre. Customer for life!read more
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