How Much Can I Borrow On A Mortgage?

There is no simple answer to the question of how much you can borrow on a mortgage. 

• In the 60s, 70s and 80s it used to be that most mortgage lenders would offer mortgages based upon 3 X sole income or 2.5 X joint income. 
• In the 90s and the 00s there was a more looser underwriting policy, with many lenders offering 100% loan to value (zero deposit mortgages) as well as lenders offering as much as 9 X income multiples and others even offering ‘self certification’ mortgages where you could personally certify that you earned £X,000 pa with no requirement to prove income.
• In the late 00s, many high-profile lenders went bankrupt such as the Bradford and Bingley with toxic mortgage debt as over lending to higher risk groups start to fail.  The Credit Crunch crisis of 2008/09 was the final straw with banks around the globe needing government support and bailouts.

Mortgage Market Review (MMR)

After the Credit Crunch, the UK government and financial regulator conducted a review of the mortgage market over a few years that was published 2013/14 to try and ensure that no banking crisis should ever reoccur.   

• Strict capital adequacy requirements were already in place for banks even before the MMR but this became more formalised in 2014 with lenders required to carry assets to match any liabilities they had in mortgage debt.
• Mortgage lenders were also required to comply with strict affordability tests.  Not only were checks required that a borrower could afford the mortgage at current interest rates at the time, but lenders and mortgage brokers must also carry out mortgage stress tests to check affordability if interest rates increased by 3% but also what would the position be if a borrower was made redundant, had a baby or a career break.
• Mortgage stress tests were removed on 1 August 2022 following the pandemic, difficult property market and trying to stimulate the property market given the housing shortage crisis.

Consumer Duties

Today, lenders still conduct mortgage affordability tests, and the Financial Conduct Authority (FCA) also expects lenders to be responsible with their lending policy to ensure consumer fairness as well as penalising lenders with less rights should a borrower be unable to pay their mortgage.  This is a real stick in that if lenders do not lend responsibly, they will be left with the liability if they have irresponsible.

Mortgage Affordability Calculators

Most lenders will have their own, commercial sensitive, lending criteria and affordability policy, so they usually have a mortgage affordability calculator on their website or at pre-application stage.  You will be asked in depth about your income and expenses and other debt to establish your suitability to borrow.  This is stricter today given recent cost of living increases as well as bigger deposit requirements and higher interest rates.

In our experience, you should expect to be able to borrow up to 4.5 X income provided you have no other major debts to service.

See Our Mortgage Affordability Calculator (registered users only): Mortgage Afford

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