View more on these topics

Importance of living within your means

Britain is a diverse little island and the cost of property in different areas of the country can vary wildly.

payne.jpg

But the salary of an air traffic controller, for example, is around £50,000 no matter where they live so it’s all relative.

A blanket decision to offer the cheapest mortgages to those earning £50,000 or more could shut a number of home owners out of the property market when they pose little risk to lenders.

There is a significant difference between living within our means and living comfortably within our means, and that difference is our income to outgoings ratio.

For those who fall into the first category life can start to feel like walking a tightrope – teetering on the edge and desperately trying to maintain some balance.

For those lucky enough to be in the second camp, life is less complicated and an interest-only mortgage is often more appealing for the freedom it offers. It is less to do with income though and more to do with outgoings.

Brokers need to be certain that they are offering the right advice to the right people, as there is nothing worse than when a home owner cannot cope with their repayments.

The result of not living within our means can be catastrophic to individuals, families and the reputation of the industry.

Responsible lending is a good start. But most important is the need to treat clients as individuals, taking factors such as income, outgoings and geographical location into account before turning them down.

Recommended

No change on cards for rest of year as MPC holds base rate once more

Interest rates look increasingly likely to remain on hold for the rest of the year, following the Monetary Policy Committee’s decision to freeze them at 0.5% last week for the 37th consecutive month. It also voted to maintain the size of its asset purchase programme. MPC members were split 7-2 on whether to increase the […]

dave_pinnington.jpg
1

Secured loans a good fit for raising capital

Every dark cloud has a silver lining, so I urge all brokers to take heart in the wake of a number of lenders withdrawing from interest-only loans or reducing the LTV they will permit for interest-only.

Newsletter

News and expert analysis straight to your inbox

Sign up