Be realistic about debt
CAROLINE CULOT Borrowers should not get into difficulties with Abbey's new five-times salary mortgage offer, providing they get the right advice beforehand, said broker My Mortgage Direct this week.
Borrowers should not get into difficulties with Abbey's new five-times salary mortgage offer, providing they get the right advice beforehand, said broker My Mortgage Direct this week.
It said Abbey's move to increase homeowners' borrowing power must be kept in perspective. It comes after last week's announcement that Abbey was to offer homebuyers a mortgage based on five times their salary.
“Abbey's offer may be interpreted as somewhat reckless at first but we should remember where the responsibility for sensible mortgage lending lies,” said My Mortgage Direct managing director Paul Hearnden. “Borrowers must take a realistic attitude to how much debt they can manage and advisers must ensure that their clients are fully aware of the consequences of overloading themselves with a huge mortgage.
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“Just because a lender makes an attractive offer, it doesn't mean it's right for everyone.”
As the gulf between property prices and salaries widens, it seems the norm of lending based on two or three-and-a-half times a salary has to change.
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“The current climate of 'must-have-it-now' has led even the most clued-up borrowers to believe that this kind of offer from a trusted name like Abbey must mean it's OK to borrow up to hilt,” said Mr Hearnden. “Remember that other credit commitments will reduce the amount of loan available and that how a borrower conducts their credit file will be a very important consideration.
“With affordability checks and credit searches, this move should not, in theory, result in home-owners getting into deep water.”