Paul, are people being more cautious about their borrowing?

Early this week I was asked to comment on whether or not people are being more cautious about their borrowing.

The particular client types who I help who are always going to find themselves looking at the maximum borrowing I can achieve. Naturally the more you borrow the more interest you pay so the more the monthly payments will be. The majority of clients I deal with are those effected by life events and need to buy their former partners out and start again on a sole mortgage application. Or where the property prices are still so expensive, the clients still have that hunger and ambition to buy. Clients who have upskilled into better paid employment, had promotions, increased working hours or those that have started profitable and sustainable businesses may still want that dream property and are willing to pay those new inflated monthly mortgage payments to secure the borrowing they need.

Having said that I have had clients recently that have said to me lets discuss the monthly mortgage repayment find how much that will be and then see how much I can borrow. Once I have assessed the income and expenditure of a client the conversational fact find will go along the lines of the client really does not want to pay any more than x amount per month. I then source a mortgage over the initial scheme term and discover the borrowing amount that is then the clients maximum borrowing ceiling. I may play around with the mortgage term which makes the monthly payments cheaper but limits the amount borrowed but over a longer mortgage term that same monthly payment means they can borrow more as they are saving on capital but having to pay more interest as you are borrowing more.

I number of lenders have opened out the maximum age that a client can work to up to the of 75. Some have cracked down on affordability going into retirement but providing the mortgage repayments are still affordable some lenders go to aged 80 on a capital repayment mortgage. This has a great advantage of making the monthly mortgage repayments affordable per month, but you need to be aware you will be paying more interest to the mortgage lenders as you pay the interest back over a longer mortgage term.

When it comes to making offers on properties, I always tell my clients to negotiate. If the property for sale is appropriately priced and marketed as it should be then these opening offers should always be turned down. The house is still an asset for the seller, so they are not going to let it go cheaply. This is one area clients are looking to limit the amount borrowing. Some sellers dependent on their personal situation will accept the lower negotiated offer and the borrowing then doesn’t have to be as high as projected. Some sellers will hold out for the full market value, and which means the higher borrowing amount for the buyer.

I believe people are looking at affordability now more than ever and what they can afford. I would say for a number of clients they may find themselves paying back mortgage borrowing back over a longer period of time into retirement to keep the monthly repayments as they once was or face higher monthly repayments to ensure the borrowing is all paid back in previous timeframes such as before retirement. Those that choose to limit the borrowing altogether will end up downsizing or purchasing smaller homes more affordable homes such as flats or small 2 bedroom houses. It will go down to personal risk and appetite. A future generation may well have to choose what they want to spend their money on holidays, cars, electronic and gadgets or homes.