After the stamp duty holiday deadline, MoneySuperMarket researched to determine whether mortgage search volumes were affected. Surprisingly, they have remained steady, owing to the growing availability of 95% loan to value (LTV) mortgages brought back by the mortgage guarantee scheme. The new reduced stamp duty holiday rate that ends in September might also be responsible for the steady figures. Here, I take a look at the most popular mortgage types for Brits.
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What is the most popular mortgage type?
The research identified that the average mortgage amount searched for is £213,000. Additionally, two-year fixed-rate and five-year fixed-rate mortgage deals are the most popular mortgage types for Brits. 40% of the customers prefer two-year fixed-rate deals, while 28% five-year fixed-rate mortgage deals.
It’s important to keep in mind that just because the two mortgage types mentioned above are considered the most popular, it doesn’t mean they’re good for you. It’s always wise to choose a mortgage deal that suits your unique circumstances. Furthermore, if you find it challenging choosing a mortgage type, you can’t go wrong seeking help from independent financial advisers or mortgage brokers.
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How much do I need to earn to get a mortgage of £250,000 UK?
Since the average mortgage amount searched for is £213,000, it might be worth checking if you qualify for a £200,000 – £250,000 mortgage.
More often than not, income is the first thing lenders consider when determining whether you’re eligible for particular mortgage types. However, it’s not the only factor considered.
Most mortgage lenders cap lending at 4.5 times your annual income. However, based on your unique circumstances, you can come across 3, 4, 5 or 6-times caps. Therefore, you might need to make about £55,556 a year to be eligible for a £250k mortgage.
In addition, lenders may look at your debt-to-income (DTI) ratio. This is your monthly income versus expenses; the lower the DTI, the higher your chances of eligibility. Use a DTI calculator to check whether you have a low or high DTI – most lenders consider a 39% or lower DTI.
Lenders will also look at your credit score. This is a three digit-number that informs lenders whether you’re reliable when it comes to borrowing and repaying the money.
Can you get 5% mortgages in the UK?
Owing to the mortgage guarantee scheme, many lenders have brought back 95% LTV mortgages. However, before you jump at the opportunity, it might be wise to consider your financial situation and unique circumstances. For example, if you plan to sell your house in the short term, especially with house price uncertainty, a 95% LTV mortgage could result in negative equity.
Additionally, though coming up with a 5% deposit enables many aspiring homeowners to afford mortgages, it’s always recommended to put up a larger deposit. The advantage is that your borrowing ratio lowers, and you enjoy lower mortgage rates. Remember, you might still need home insurance, and lower mortgage rates can help you afford it.
