The ideas are very similar to what lenders have done naturally since the credit crunch and include:-
1. Increase Loan to value ratios eg deposits of 5% increase to 20%
2. Increase cost of the mortgage by reducing mortgage term eg 30 to 25 years
3. Reduce income to debt ratios eg restricting to 3x income not allowing 5x
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People who own/buy with cash These measures imposed would limit your ability to hope your property’s price will continue to rise exponentially so you can sell in the future and trade down, helping fund your pension. Although it would also limit your ability to sell, it’s likely that someone with high levels of equity would still buy – as long as the property is priced fairly. |
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People who own with 40% or more equity
From a buying perspective, you are unlikely to be affected as lenders would be competing for your business. However, if funding was restricted and you were reliant on a first time buyer or someone trading up, it may be they would be starved of funds, so although you could afford to buy, you would struggle to sell.
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People who own with little, zero or are in negative equity If the rules came into place, in the short term they would hinder you from being able to make ‘quick gains’ in price from the property you have bought. In addition, it would be difficult to securing funds and potentially, if selling to a first time buyer, they would also find it tough to secure funds, making it difficult to sell your home. However, in the longer term, hopefully prices wouldn’t grow so much, so you could ride out the tighter credit conditions and postpone your move until prices were brought back in line. |
People who are first time buyers
With tighter lending restrictions in place it’s likely you will find it increasingly difficult to secure a mortgage without a big deposit, so unless a scheme such as Help to Buy was available, tightening credit conditions would make your ability to buy difficult.
On the other hand, lower inflation rates would mean you wouldn’t have to worry about huge price growth meaning you could take your time to plan and save for your move and just avoid buying during the tough credit conditions imposed.
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