Some social landlords are saying that capping mortgage lending may spark an increase in applications f0r shared ownership.
In June, Chancellor George Osborne announced that the Bank of England will have new powers to cap the size of mortgage loans as a share of the lenders income or the value of the home itself. Mr.Osborne said that if the Bank of England thought that some borrowers were being offered what they considered to be excessive amounts of debt it could limit the amount of high loan to income mortgages each bank can lend or potentially ban all new lending above a particular a loan to income ratio ,if the bank thought that it would be able to impose similar caps on loan to value ratios.
The new tools for the Financial Policy Committee will be in place by the end of the current Parliament, which is 2015. An insider for shared ownership said that a cap could increase the applications for shared ownership if more people are unable to get mortgages. Notting Hill Home Ownership, where the insider is from, reported an increase last year of people on higher incomes considering shared ownership. Last year, 57 per cent of the applicants earned less than £40,000 compared with around 45% last year. Applicants who earned more than £55,000 increased from 16 per cent to just over 20% over the same period.
The insider warned that the area most at risk of this dangerous market was London, where some people will be priced out of the open market because they are unable to get mortgages, but they still earn too much for shared ownership.
There is already a huge demand for shared ownership, with around 4000 people on waiting lists at several shared ownership agencies.
To find out more about potential mortgage caps, call the Mortgage Express contact number.