The average self-employed mortgage customer in the UK could have taken out a mortgage 29 per cent larger than the original loan borrowed while the average first-time buyer could borrow only 19 per cent more, research from Kensington Mortgages has shown.
Furthermore, first-time buyers in the South East were borrowing the maximum sums, as house prices remain high relative to incomes.
The Kensington Mortgages Affordability Tracker (KAT) also showed that those who took out a mortgage between March and June were borrowing more than homeowners who took out loans in the first quarter of the year.
KAT models the finances of British homeowners, based on information supplied on successful mortgage applications to banks, building societies and other lenders.
The data captures the sums spent by families on household bills, travel, food, insurance, debt repayments, and all other expenses, to give a granular picture on the true amount of disposable income left at the end of each month.
Increased borrowing
In the second quarter of 2019, the KAT dropped by 1.5 percentage points to a reading of 30.3 per cent, which indicated the households who took out a new mortgage or refinanced their home in the period had less disposable income each month than the households who took out a mortgage in the previous quarter.
Overall, homeowners were borrowing more in the second quarter of 2019.
When tracking the affordability of the mortgage market, households in the South East commuter belt were borrowing the most, with the average customer only being able to borrow eight per cent more than the initial amount secured.
By contrast, borrowers in the North had the most financial headroom with the average homeowner able to borrow 52 per cent more than the initial sum secured.
Mark Arnold (pictured), chief executive of Kensington Mortgages, said: “What’s interesting is that self-employed borrowers are leaning more towards the cautious side, as they have plenty of scope to borrow more if desired compared to first-time buyers.
“Unsurprisingly though, the North/South divide still exists. Borrowers in the North have the greatest room for affordability while in contrast, higher living and house prices mean those in the South East can only borrow slightly above the original amount.”
