Mortgage - How much I can borrow depends on which geographical area I live in UK?

JonMitchell

Hi folks

I hope I can get some advise on mortgage - how much I can borrow via mortgage lender website. I am going to re-mortgage my existing loan and played around with the amount I can borrow from a mortgage lender and noticed something quite strange.

One of the question on the mortgage lender website, mortgage calculator on "How much could I borrow", asked for "Where's the Property" - I currently live in Yorkshire, the indicative amount the bank would loan me would be ~£50K, the LTV is around 18%. However, if I change the location of my property, discovered it by my fat finger, to say London, the bank indicative loan dropped to ~£42K???!!

I would have thought the current lending criteria, as per FCA reviewed of banks, is based on affordability and valuation of the property value by high street lenders? But somehow, this difference between Yorkshire and London is something I don't quite understand!

Obviously London's properties are far far expensive than Yorkshire and I find it strange that this high street mortgage lender is providing indicative borrowing figure based on demographic area?? Was wondering if anyone can shed some light on this.

MacMickster

Surely this is due to the higher cost of living in London. More of your income would be needed for living costs other than your mortgage leaving you with less affordability to pay that mortgage - hence the lower indicative loan amount.

Thrugelmir

Lenders run mortgage books. As a consequence they'll diversify their exposure across the whole of the market in the manner determined by their operating board. Mortgages aren't like selling cans of baked beans. There is only a finite amount of funding. How it's allocated varies continuously.

ACG

If you go and buy a pint of milk in yorkshire, I would put money on it being cheaper than in London. They will use ONS figures for general expenditure and the cost of living is more in London.

JonMitchell

Thanks for the input info. So is it true that mortgage is based also on demographic location and not just personal affordability? Surely personal affordability that the lender assess covers the demographic area that I live in, isn't it? Does it make sense to anyone?

So say if my property is in London and I require a re-mortgage of £50K instead of the indicative £42K, will the mortgage lender consider the "stretch" due to demographic location even if my affordability and valuation of my property are well below mortgage lenders risk assessment.

ACG

Not many lenders split it down to areas, but I cant see them doing a stretch otherwise what would the point in splitting it down to that level be?