Barclays and NatWest cut the amount you can borrow as a mortgage by up to 18%
BARCLAYS and NatWest have cut the amount home buyers can borrow by up to 18%, leading to fears more lenders will follow suit.
Barclays is now capping home loans to 4.49 times the borrower's salary, down from 5.5 times, a difference of 18%.
The high street lender introduced the limit on Friday without warning, and is applying it to applications that have already been submitted.
It means hopeful buyers won't be able to afford homes previously within their budget or face stumping up a bigger deposit to make up the difference.
For example, someone earning £25,000 a year previously would have been able to borrow up to £137,500 but now they are limited to £112,500.
The cap won't apply to mortgage deals that have already been offered but are waiting to complete.
How to boost your chance of getting a mortgage
HERE'S how you can boost your chances of being accepted for a mortgage:
Check your credit score before you apply - Lenders will look at your credit score before they decide whether to offer you a loan. If your application is rejected then it will appear on your credit report, which could affect any future borrowing. Check your score by contacting one of the three main credit referencing agencies - Experian, Equifax or TransUnion.
Shop around for a mortgage - You should never assume that yout bank or building society will give you the best mortgage deal. Make sure you shop around to get the best rates.
Draw up a budget planner - It's important that you approach a lender with a fully thought out plan of how you will make the repayments.
Reduce your credit card debts - You can still be accepted for a mortgage with credit card debt, but you should try to reduce those monthly payments if you can.
Resist going on a spending spree - As part of deciding whether or not to accept your mortgage application, a lender or bank will have to know that you can afford to make the monthly repayments. They do this by reviewing your recent bank statements and a spending spree may make it look like your outgoings are too costly.
Meanwhile, NatWest reduced the amount it is willing to lend to self-employed workers who apply for a loan from September 4 onwards.
It has issued a new mortgage calculator to brokers that limits borrowing to 4.25 times the borrower's earnings, instead of 4.9 times before - a 13% drop.
For someone who earns £25,000 a year, the amount they can borrow is reduced by £16,250 - from £122,500 to £106,250.
Typically, mortgage customers can borrow up to 4.5 times their annual salary but it depends on the conditions set by the lender.
There are other factors that can also affect how much you can borrow, such as your credit score and the size of your deposit - the best deals are given to the least risky customers.
But now there are fears more lenders could follow suit, locking many potential buyers out of purchasing their first or next home.
Mortgage broker Rachel Dixon, from RH Dixon, said: "I'm disappointed at the banks' sudden change of rules.
"These decisions clearly show lenders are concerned about the future of the economy, the end of furlough, the direction of house prices.
"I expect more lenders to follow in coming weeks."
What help is out there for first-time buyers?
GETTING on the property ladder can feel like a daunting task but there are schemes out there to help first-time buyers have their own home.
Help to Buy Isa - It's a tax-free savings account where for every £200 you save, the Government will add an extra £50. But there's a maximum limit of £3,000 which is paid to your solicitor when you move. These accounts have now closed to new applicants but those who already hold one have until November 2029 to use it.
Help to Buy equity loan - The Government will lend you up to 20% of the home's value - or 40% in London - after you've put down a 5% deposit. The loan is on top of a normal mortgage but it can only be used to buy a new build property.
Lifetime Isa - This is another Government scheme that gives anyone aged 18 to 39 the chance to save tax-free and get a bonus of up to £32,000 towards their first home. You can save up to £4,000 a year and the Government will add 25% on top.
Shared ownership - Co-owning with a housing association means you can buy a part of the property and pay rent on the remaining amount. You can buy anything from 25% to 75% of the property but you're restricted to specific ones.
"First dibs" in London - London Mayor Sadiq Khan is working on a scheme that will restrict sales of all new-build homes in the capital up to £350,000 to UK buyers for three months before any overseas marketing can take place.
Starter Home Initiative - A Government scheme that will see 200,000 new-build homes in England sold to first-time buyers with a 20% discount by 2020. To receive updates on the progress of these homes you can register your interest on the website.
It's the latest in a string of restrictions borrowers now have to overcome following the economic impact of the coronavirus lockdown.
Nervous lenders pulled almost all mortgages that only required a 5% or 10% deposit in the immediate aftermath.
And while some 10% deposit mortgages have returned, it's still only 6% of the number of deals on offer this time last year, according to figures from comparison site Moneyfacts.
Flat buyers are also being locked out of some of the best deals, meaning first-time buyers won't be able to make the most of the government's Help to Buy equity loan scheme.
On top of this, Nationwide is refusing to lend to first-time buyers whose entire deposit has been gifted to them, by the bank of mum and dad for example.
Furloughed workers are struggling to get a mortgage too, as lenders wait until the scheme ends and redundancies begin to take affect before offering loans.
Most read in Money
It comes as the government hope to stimulate the economy through the housing market by temporarily axing stamp duty for all properties worth up to £500,000 until March.
A spokesperson for Natwest told The Sun: "We continually review our proposition to ensure it is in line with current market conditions."
A Barclays spokesperson added: ";We regularly review our lending policies and today have made some changes to loan-to-income multiples."
READ MORE SUN STORIES
