Gloucestershire mortgage broker warns clients against squeezing home loans

Banks are making it harder for homebuyers to get the loan they want as the cost of living crisis rages.

Mortgage brokers have warned customers they should act quickly as many big banks tighten their mortgage affordability tests, ending the era of low rates.

It makes it harder for consumers to borrow as much as before and is expected to slow the property market as buyers are forced to scale back their ambitions.

Santander changed its criteria last week and brokers told the Guardian they expect other big lenders – HSBC, Barclays, Lloyds Banking Group and NatWest – to follow suit.

Ray Boulger, senior analyst at brokerage John Charcol, said it was “arguably the biggest mortgage crunch since 2009”.

Enzo Mora, Founder and CEO of Mortgage Brain based in Gloucester, said: “Lenders made changes to their affordability calculators last week to coincide with the new tax year and to reflect data from the ONS showing the true cost of living increase .

“They have applied the new National Insurance contributions, council tax increases and rising gas and electricity bills. This has meant that many of our customers have been negatively affected in terms of their ability to maximum loan.

“The value of advice is now more important than ever. With volatile and rapidly rising mortgage interest rates, we want to find the best solution for our clients and they need to act quickly to minimize the impact on their monthly budget.”

Since the financial crisis more than a decade ago, mortgage applicants have had to undergo strict affordability checks to ensure they can keep up with repayments. Banks want to know all of their major expenses, including monthly childcare expenses, car reimbursements, and even how much they spend on the gym.

But many banks rely on household spending figures from the ONS to judge a borrower’s spending. This data will now take into account soaring energy bills, rising social insurance and a sharp increase in the cost of household goods.