Affordability issues, evolving incomes and a growing gap

Posted 20-11-2018

The average house prices in England have risen by 173% since 1997. This is according to research by the Institute for Fiscal Studies (IFS) which also found that incomes of young adults have increased, but by just 19%.

It’s no surprise then that the number of 25-34 year olds owning their own homes has fallen from 55% in 1997 to 35% in 2017.

A growing gap

When it comes to looking for a mortgage, even if borrowers had a 10% deposit, only around 60% of young adults are able to borrow enough to buy even one of the cheapest homes in their area, compared to 90% in 1996, according to IFS.

Then there’s the evolved make-up of incomes. For example,

  • Self-employment has grown rapidly in recent years – from 3.3 million of the UK labour force in 2001 to 4.8 million in 2017

  • Part-time employment has risen from 7.9 million part-time workers in 2010 compared to 8.5 million in January 2018. And according to the Office of National Statistics, those working on a part-time basis are more likely to earn additional sources of income

  • Freelancing and contractor work is also on the rise and has contributed to the shift in the way that people earn their living.

So as potential homebuyers now rely on a more diverse selection of income sources, it may not always be as simple for a high street lender to accurately establish your clients’ affordability.

Secure the loan size your client wants

By manually assessing your clients’ affordability, specialist lenders could provide a viable and affordable alternative.

Specialist lenders don’t base their decisions on a credit score and they don’t have the same automated approach that high street lenders have. They’re not just focused on securing mortgages for your clients with CCJs, defaults, adverse credit or previous financial difficulties.

Specialist lenders can give more personal consideration to a borrower’s income. They are better equipped to consider contractors, company directors, people earning significant bonus or overtime and clients with multiple layers of income, including investments and different sources of employment.

To find out more, contact your BDM.


Check out our competitive rates to see if we can help.

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