Average earners see borrowing capacity rise by up to £13,000
Individuals with outstanding car finance are now able to borrow significantly more for a mortgage than earlier this year, according to recent analysis from Coventry Building Society.
The change follows updated guidance from the Financial Conduct Authority (FCA), which has prompted lenders to adjust their affordability assessments.
In March, a single applicant on the average UK salary would have seen their mortgage borrowing capacity reduced by over £18,000 if they had a monthly car payment of £345. Under the revised rules, the same car payment now reduces maximum borrowing by just £5,000, representing an increase of nearly £13,000 in potential mortgage funds.
For joint applicants who are both earning the average salary and each with a £345 car loan, the reduction in borrowing has also lessened. Previously, their maximum borrowing would have been cut by more than £13,000; now, the figure stands at £5,677.
The FCA’s updated guidance allows lenders greater discretion in how they assess affordability, forming part of a broader initiative to improve access to homeownership.
“Just a few months ago, a typical car payment could reduce borrowing power by over £18,000 – that could mean people had to compromise on space, location, or put the brakes on their move altogether,” said Jonathan Stinton (pictured right), head of intermediary relationships at Coventry Building Society.
“Now, thanks to regulatory changes, that impact has dropped to around £5,000. It’s a big shift, and it gives borrowers more flexibility to balance lifestyle choices like car ownership with their homebuying goals.
“That said, a car payment still affects how much clients can borrow—it’s just not the deal-breaker it used to be. Brokers can help clients navigate these changes to make more informed decisions, especially when remortgaging or adjusting terms.”
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