New FCA rules mean that mortgage applicants with car payments are now being eligible for thousands of more than six months ago, according to analysis of Coventry Building Society.
The mortgage provider, who has published the investigation to coincide with new car registrations that are published at the beginning of September, said that the change is due to new affordability calculations.
The new guidelines, divided by the Financial Conduct Authority (FCA) came into force at the start of the summer and average mortgage providers have more flexibility in their mortgage reviews. They are part of a broader strategy to make home ownership more accessible.
For potential borrowers it means that having a car loan may not be so harmful to your chances of getting a mortgage as in March.
Indeed, the Building Society explained in March that a single buyer – who earned the average British salary – would see his mortgage loans decreasing by more than £ 18,000 if they had a car payment of £ 345.
Today, the same car payment takes only a £ 5,000 discount on their maximum loans, so that they can borrow almost £ 13,000 extra for their home.
For joint buyers who both earn the average salary, they would have seen their maximum loans in March by more than £ 13,000 if they each had a car loan of £ 345. Now their borrowing will be reduced by £ 5,677, Coventry Building Society said.
Jonathan Stinton, head of intermediary relationships at Coventry Building Society, said: “Only a few months ago could a typical car removal decrease the loan power by more than £ 18,000 – that could mean that people had to make a compromise over the space, the location, or the brakes completely.
“Now, thanks to legal changes, that impact has fallen to around £ 5,000. It is a major shift and it gives borrowers more flexibility to balance lifestyle choices such as car ownership with their home head goals.
“Having said, a car payment still affects how many customers can borrow it is simply not the dealbreaker it was. Brokers can help customers navigate these changes to make better informed decisions, especially when remorting or adjusting conditions.”