DEBATE: After one lender launched a six-times-salary deal, are we headed towards a mortgage timebomb?

2015 General Election - Housing
Over-generous lending terms could come back to haunt both the borrower and their lender (Source: Getty)

After one lender launched a six-times-salary deal, are we headed towards a mortgage timebomb?


Andrew Hagger, personal finance expert at MoneyComms, says YES.

A shortage in UK housing supply means that property prices continue to increase, albeit at a slower rate in recent months. This means that lenders must stretch their lending criteria in order to satisfy internal lending targets – always a precarious balancing act.

Six-times-salary, even for professionals, is a dangerous precedent to set. Just because someone works in a high-paying profession, that doesn’t automatically make them less of a risk.

There’s also the danger of a ripple effect – lending a bit extra to professionals today could lead to more generous multipliers for borrowers in mainstream occupations tomorrow.

Rather than continually tweaking criteria as a means of keeping up with house price inflation, lending should always be based on affordability.


The Brexit outcome is far from certain, but what happens if confidence ebbs away, house prices slide, and unemployment starts to rise? Those over-generous lending terms could come back to haunt both the borrower and their lender.

Daniel Hegarty, chief executive of free online mortgage broker Habito, says NO.

We welcome innovation in the mortgage sector and new products that help first-time buyers get on the ladder. While Darlington’s six-times-salary mortgage product is headline-grabbing, its lending criteria are strict. This mortgage is for young professionals with only a specific set of highly-qualified careers considered, including doctors, dentists, lawyers, and engineers.

On top of this, affordability is safe-guarded by a number of things. There’s a cap for loan-to-value at 90 per cent, and the maximum lending is £400,000. To be eligible, the individual’s expenditure will be scrutinised and their monthly payments will be stress-tested at 8.95 per cent (three per cent above Darlington’s reversion rate).

Affordability is a huge issue across the UK, and while the number of buyers who will qualify for Darlington’s product will be very small, for those who are eligible and meet its affordability criteria, it will be hugely helpful.

Daniel Hegarty, chief executive of free online mortgage broker Habito, says NO.

City A.M.'s opinion pages are a place for thought-provoking views and debate. These views are not necessarily shared by City A.M.



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