Homebuyers encouraged to over-mortgage
29 July 2004
Despite the threat of more interest rates hikes, homebuyers are being encouraged to over-mortgage by up to one in ten mortgage consultants.
This is according to a survey compiled by the Mortgage Code Compliance Board, which found that nine per cent of consultants said something a borrower felt uncomfortable with - usually regarding the possibility of borrowing more than was necessary.
The survey by the MCCB, was an attempt to uncover how attentive advisers are to their client's need and their ability to afford a mortgage.
MCCB communications director, Brad Baker said the survey showed some advisers suggesting ways in which housebuyers could overstate their earnings in order to borrow more. However, Mr Baker added: "These were initial discussions and things would have been said that could have been corrected later in the process."
The survey further found that only 24 per cent of clients were clearly advised to leave enough money to live on.
However, MCCB chief executive, Luke March, remained buoyant about the results. He said: "There is definitely scope for mortgage consultants to provide customers with more information during the initial mortgage discussion, particularly on financial matters which may affect their future repayments."
Many analysts expect interest rates to rise by another quarter of a percentage point to 4.75 per cent in August, with many also predicting rates above 5 per cent by the end of the year.
The Council of Mortgage Lenders' latest report similarly found borrowers are over-stretching themselves, with the typical first-time buyer now borrowing more than three times their income.