Just like property value peaks and troughs, the ability to borrow follows similar patterns.
The lending cycle generally loosely follows the property cycle, but lags behind it.
When properties are valued most lending is easiest to get and even when it starts the first part of the decline phase the lenders often take a little while to change their policies.
Similarly when property values start climbing after a trough Banks tend to take their time easing policies.
Like any business banks earn money when they have their product out in the marketplace. After a period of “bust” where money has been hard to lend they start relaxing credit policies, generally by increasing loan-to-value ratios against properties e.g. when property values are low they may lend to 80% of a property’s value and when values firm they go to 95% (or even possibly 100%, as in the last cycle).
As increases in values are sustained and interest rates are lower they tend to ease up on how much you need to earn to borrow more i.e. for the same income you can borrow a greater amount.
No matter what the Bank says, the key to borrowing at any time of the cycle is down to your personal circumstances and how you feel about it.
At Edge Mortgages we pride ourselves at looking at the full picture when it comes to your borrowing requirements and looking at where you want to be not only now, but into the future. Give us a call to discuss your plans.