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There is plenty to be upbeat about in the current financial climate; unemployment is falling and, miraculously, so is inflation. New confidence in the housing market has developed as a result of the government’s Help to Buy policy and new mortgage applications are at a new high.
Whilst all of this is undoubtedly good news, new rules designed to prevent an unsustainable housing boom have been introduced, ensuring that house buyers will have to prove every penny of income and account for every penny of outgoings. If you are looking for a new mortgage, being prudent with your spending is the name of the game.
Since April 26th 2014, mortgage affordability became strictly regulated; one of the main instabilities in the housing market in the years up to the 2008 crash was the ‘never, never’ approach that some borrowers took when taking out home loans.
In a market that seemed to inexorably rise month on month, year on year from about 1998 onwards, it seemed to make sense to the banks and to borrowers to lend three, four and sometimes even five times salary. If borrowers couldn’t pay, they could always downsize again with a chunk of equity from the property’s inflated market value to reinvest with.
The result, as we all now know, was a housing bubble of spectacular proportions, negative equity, unsustainable personal debt levels, and a very painful half decade long readjustment of the market. This is hardly an experience that the nation is keen to repeat, but without sensible controls over lending, history might repeat itself as the economy moves from recovery to boom.Can I get a Mortgage?