Martin Lewis has warned how the cost of living crisis could impact people applying for a mortgage this year. Speaking on the latest episode of his podcast, ‘Ask Martin Lewis Podcast’ on BBC Radio 5 Live, the founder of MoneySavingExpert.com had a grim message looking to buy a house.
He was asked if the current cost of living crisis would impact someone’s credit worthiness, and confirmed that it would if you’re doing something that has a negative effect such as missing payments, altering the way you pay or if you’re late on paying things.
But he also highlighted that mortgage applications are one area that he is concerned about, reports The Daily Record. He explained: “One of the things I’m concerned about, for example, is when you apply for a mortgage application one of the biggest things that they do is an affordability check - this isn’t coming from your credit file, this is coming from them assessing affordability.”
Read more : Martin Lewis issues warning to everyone with a savings account
Martin described how an affordability test is done based on disposable income, not your credit rating, score or worthiness.
He said: “When people talk to me about student loans being a problem on your credit file, I say ‘it isn’t on your credit file but it does affect your affordability’ because if you’re repaying your student loan that means you have less disposable income.
“The same is true of a cost of living issue, if all of your costs are going up, you have lower disposable income, less room to pay the mortgage and therefore, you’re going to find it more difficult to pass the affordability test - not the credit test - unless you’ve defaulted or had a credit problem.”
So far this month, millions of households across the UK have seen their energy bills increase following the implementation of Ofgem’s latest price cap on April 1. National Insurance Contributions (NICs) have also gone up by 1.25 percentage points, which means take-home pay for workers will be less.
Most utility services have also increased their monthly subscription costs too. And last week, rapidly rising food and fuel prices sent inflation to another 30-year high of 7% for March - even before energy bills spiked. The Office for National Statistics (ONS) said the figure was driven by food and fuel prices - petrol at 160.2p per litre on average in March and diesel at 170.5p, were both record high prices.
