Nearly a third of lower income earners unable to secure the loan size they want

09 June 2022

Nearly a third of people (29%) earning less than the median UK average income are unable to secure the loan size they request, according to the latest MBT Affordability Index.

Data analysis from thousands of cases researched through MBT Affordability in April has shown that 29% of mortgage applicants whose household income is less than £62,000 were offered a loan size smaller than they requested.

This compares to just 11% of mortgage applicants with a household income of £100,000 or more, who were offered a smaller loan size than they requested. And for mortgages applicants whose household income is more than the median average of £62,000, but less than £100,000, only 12% were not offered the loan size they wanted.

According to the ONS, median annual pay for full-time employees in the UK was £31,000 last year. This analysis has assumed joint mortgage applications from two full-time employees, providing an average income of £62,000.

Tanya Toumadj, CEO at Mortgage Broker Tools, said: “Mortgage affordability is becoming more challenging for everyone as house prices continue to rise and the spiralling cost of living eats into disposable income. However, it is having a much more significant impact on those people who earn less than the median salary. It’s a stark contrast that 29% of mortgage applicants with an annual income of less than £62,000 are unable to get the loan size they need, compared to just 12% of applicants whose household income is between £62,000 and £100,000.

“This is perfectly logical, of course, as the basic costs of living are the same for everyone, so those earning lower salaries have less disposable income each month once they have paid for essentials like food, power and fuel.

“However, it’s important that this sizeable portion of the population are not disenfranchised from the ability to secure a mortgage to buy a home. The good news is that our data shows 70% of cases in April, where the household income was less than £62,000, were offered the loan size they requested. And so, there are options that are considered sustainable and affordable for lower income households, but there may be fewer lenders able to offer these options.

“The emphasis then is on the importance of mortgage brokers carrying out thorough affordability research across the market, to ensure that they are able to secure the best affordability solution for their clients. This really matters. According to research conducted previously, only 58% of brokers search outside of the top 10 lenders, and the difference in affordability results by not searching whole of market is huge with the top lender for affordability being outside of the top 10 lenders in 73% of cases.

“The easiest way for brokers to ensure they are considering a wide panel of lenders for affordability is to use the technology, and at Mortgage Broker Tools, we provide the platform with the most extensive panel in the market.”