Cost of living crisis has seen lenders increasing the affordability checks they carry out on new borrowers

MORTGAGE lenders are increasing the affordability checks they carry out on new borrowers due to the soaring cost of living, an expert says.

Jonathan Rolande said people hoping to move should brace themselves for reduced choices.

His warning comes after figures last week show UK inflation soared to a 30-year high in the year to December thanks to rising energy costs, strong demand for goods and services, and ongoing supply chain disruption.

According to the latest data from the Office for National Statistics (ONS) the consumer price index (CPI) measure of inflation rose to 5.4%, the highest since March 1992 when it was 7.1%.

But Jonathan, from House Buy Fast, says property owners are yet to feel the full force of inflation and warned the impact for many is far worse.

He said: “On top of the inflated costs to run a home or buy to let, lenders are increasing the affordability checks they carry out on new borrowers. For those already finding it tough, it could mean reduced choices when it comes to picking a cheaper rate or a fixed amount to insulate against future interest rate rises.

“After seeing price double digit percentage gains in the last year alone in terms of house prices, property owners thought they were sitting pretty. But many may well have a more valuable asset but the new inflation rates will see those not earning large sums too, begin to struggle. Flooring and furniture up 14% and 12% will make property owners think twice before beginning refurbishments.

“Gas and electricity are up 28% and 19% in a year. Running repairs are up 14% for the materials whilst the people doing the work won’t notice much of a jump in their wages, on average around 2% for plumbers and builders.

“Landlords may well be hit hard too. Many buy to lets are in blocks of flats which will see increases for essential repairs and maintenance as materials rocket. Homeowners can choose not to improve their homes when times are tougher but landlords won’t have that luxury. When tenants leave it is common for cleaning and decorating to be needed, sometimes twice in the same year if good tenants don’t stay on.

Eventually as tenants can afford less, rents will be suppressed – this will take time but will add further woe to investors.”

Commenting Mortgage Broker and property investor Glen Russell from Russell Financial Solutions Ltd said “It really is a double edged sword with mortgage lenders. Yes they may be stress testing customers when remortgaging or buying a property incase of rate rises and inflation. However there has never been a time where there are so many options out there for customers’ mortgage needs. Lenders are also still willing to lend to the right customers with low deposits and even historical bad credit. There is a huge lack of supply when it comes to new property stock on the market, so high demand which will continue to push house prices up or at least keep them at a level for some time.”