House prices grow four time faster than mortgage sizes

Over the past 12 months, the average house price has grown nearly four times faster than the average maximum loan offered by lenders, analysis from Mortgage Broker Tools (MBT) has revealed.

Data from the MBT Affordability Index shows that, on average, the maximum loan size offered by lenders was £243,400 in May this year, an increase of 2.5% on the average maximum loan size in May 2020, when it was £237,500.

However, according to the latest Halifax House Price Index, the average house price this May was £261,743, representing annual growth of 9.5%, meaning the average UK home has increased in value by more than £22,000 over the last year.

The latest MBT Affordability Index found that the difference between the maximum loan size and the smallest loan size available to an average customer with the same set of circumstances was £100,900 in May 2021, up from £89,893 in May 2020.

In May 2021, the average maximum loan size available to first-time buyers grew by 2.7% to £253,764, on the previous month and the average maximum loan size available to buy-to-let investors grew by 3.6% to £362,750, over the same period.

Tanya Toumadj, CEO at Mortgage Broker Tools, said:“The housing market reopened following the first national lockdown in May 2020 and, over the past 12 months, property prices have risen at their strongest level in nearly seven years according to the Halifax House Price Index.

“In the same period, mortgage lenders have increased their appetite to offer customers larger loans, but not nearly at the same rate. There is also a growing spread between the largest loan size that one lender might make available to a customer, compared to the largest loan size available from another lender.

“So, in this highly charged property market, it’s never been more important to conduct whole of market research to identify the most suitable lender that is able to help a buyer secure the loan they need to buy the property they want.

“Comprehensive and accurate research can prove the difference the numbers stacking up and a loan completing, or a client just falling short and the enquiry withering away.”

Written by: Houseladder