Size of your deposit
Mortgage lenders will look at two key issues before deciding how much you can borrow: the size of your deposit and the size of your income.
On the deposit, the smaller yours is, the more you'll struggle to find a mortgage, let alone get a decent rate.
This imposes some tight maximum borrowing levels, regardless of your income.
That is the first restriction, and within that, lenders are also very careful with the affordability criteria they use.
Size of your income
When looking at your income, they will take into account your outgoings and existing borrowing commitments.
For example, they will ask for information about your outstanding monthly repayments on loans and credit cards, or consider the number of children you have (because you are financially responsible for their welfare).
Based on this information, they use complex criteria to work out what they think you can afford each month – and therefore the maximum they will lend to you.
But still, lenders differ significantly when it comes to this criteria. Finding the most generous lender could make the difference between you being able to afford a property in your area and being priced out of the market altogether.
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Mortgage lending: practical examples
For example, a first-time buyer earning £25,000 with a £50,000 deposit can borrow up to a maximum of £154,000 with HSBC, but only £111,250 with Santander.
Clearly this could make the difference for many borrowers between getting the property they want and missing out entirely.
Taking an example of joint buyers with a total income of £70,000 (one income of £40,000 and one of £30,000), again HSBC would lend up to £399,000, while Barclays will only offer a maximum mortgage of just £315,000.
A high-earning single borrower would find similar discrepancies when looking for a mortgage. For example, the maximum a first-time buyer earning £60,000 could borrow from HSBC is £370,000. However, Nationwide would only be prepared to lend up to £246,000.
Who will lend the most?
All the calculations mentioned in this article are not based on full mortgage offers, but represent the maximum that the lenders would be prepared to offer.
When you come to make a full application, all of your individual circumstances will be taken into consideration and it might be that the lender will actually offer you less that the maximum they initially quoted.
But still, it's worth noting that lenders' maximum figures are startlingly different.
From the lenders I checked, HSBC was prepared to lend the most overall based on income. Santander and Barclays tended to be more conservative.
Clearly, the latter are out to attract low-risk borrowers that have not overstretched themselves in order to get their mortgages. This is no doubt frustrating for borrowers who have the required deposit but do not have a large enough income to meet the lenders' criteria.
On the other hand, I think it's great that these banks are lending responsibly. Good for them.
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How much you can borrow from the banks
I chose the lenders below based on a mixture of the biggest UK lenders and those with the most appealing best buy deals, which are likely to attract the attention of borrowers.
In the examples below I entered that the borrower/s have no dependents and no monthly loans or credit card payments, where the information was asked for.
I also entered the loan-to-value amounts or actual deposit amounts listed, again where the information was required.
The single modest earner
The single modest earner has an income of £25,000 but a substantial deposit of £50,000.
|
Lender |
Maximum they would lend |
|
Yorkshire Building Society |
£112,250 |
|
First Direct |
£118,750 |
|
Santander |
£111,250 |
|
Nationwide |
£118,800 |
|
Halifax |
£118,750 |
|
Barclays |
£112,500 |
| HSBC | £154,000 |
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The joint buyers with decent salaries
The joint buyers have a total income of £70,000, with one borrower earning £40,000 and the other £30,000. They also have a £50,000 deposit.
|
Lender |
Maximum they would lend |
|
Yorkshire Building Society |
£384,300 |
|
First Direct |
£332,500 |
|
Santander |
£294,000 |
|
Nationwide |
£332,500 |
|
Halifax |
£332,500 |
|
Barclays |
£315,000 |
| HSBC | £399,000 |
The high-earning single buyer
This single buyer has earning of £60,000 and needs to borrow at 75% LTV (or has a £50,000 deposit)
|
Lender |
Maximum they would lend |
|
Yorkshire Building Society |
£269,400 |
|
First Direct |
£285,000 |
|
Santander |
£311,000 |
|
Nationwide |
£246,000 |
|
Halifax |
£285,000 |
|
Barclays |
£270,000 |
| HSBC | £370,000 |
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This article is regularly updated.