Your mortgage is going to be a significant financial investment and a long-term commitment that will require careful consideration of your budget and financial capacity. Deciding how much you can afford to borrow is a crucial step in this process, and both you and the lender will need to thoroughly evaluate your current financial situation, including any existing debts, to determine what monthly repayments you can comfortably manage.

Before you begin the mortgage application process, it’s essential to understand how much you can realistically expect to borrow and what you’ll need to contribute toward a deposit. You also need to be mindful of other potential costs associated with buying a home, such as legal fees, stamp duty, and home insurance.

Mortgage to Income Ratio

One of the most important factors to consider when taking out a mortgage is your mortgage-to-income ratio, which measures how much of your income will go towards repaying your mortgage. It is wise to keep this ratio as low as possible to ensure you can comfortably make repayments over time. Missing payments can lead to increased interest charges, a negative impact on your credit score, and, in the most severe cases, repossession of your home.

How Much Should You Spend on Your Mortgage?

A common rule of thumb is to spend no more than 30-40% of your post-tax (net) income on mortgage repayments.

This guideline is often used by homeowners and recommended by financial advisors. Sticking to this range helps ensure you have enough money left over each month to cover other essential expenses, such as utilities, groceries, and emergency savings, without feeling financially stretched. For example, if your monthly take-home pay is £3,000, a responsible monthly mortgage payment would be between £900 and £1,200. Spending more than 40% of your income on housing costs could increase your risk of falling behind on payments, especially if unexpected expenses arise or your income changes.

How Lenders Determine Your Mortgage Affordability

In the UK, lenders typically apply a borrowing limit that is 4 to 4.5 times your annual salary. This is known as the loan-to-income (LTI) ratio. However, lenders will also assess your affordability based on your outgoings, debts, and financial commitments. For example, if you have significant student loans, credit card debt, or childcare expenses, your mortgage offer may be lower than the maximum loan-to-income ratio would suggest.

Halifax and Lloyds have updated their policy to lend 5.5 times your income giving many first time buyers a better chance at buying a home.

The Bank of England has set guidelines to prevent excessive borrowing and reduce financial risks. For most borrowers, a mortgage cannot exceed 4.5 times their income, and only 15% of new mortgages can be at this upper limit. This restriction helps protect both homeowners and the economy from excessive debt and prevents a repeat of the housing market crash seen in the late 2000s.

For Example

If you earn £30,000 annually, your maximum mortgage is likely to be in the range of £135,000 to £150,000. At the same interest rate and mortgage term, a £135,000 mortgage could result in monthly payments of around £690. If your post-tax income is £2,000 per month, this equates to approximately 34% of your income.

Impact of Joint Applications

If you are applying for a mortgage with a partner or co-buyer, lenders will consider both incomes, which can increase your borrowing potential. For instance, if you and your partner have a combined annual income of £80,000, the maximum mortgage available could be around £360,000. However, joint applications also mean both parties are responsible for the repayments, so it's important to ensure both incomes are stable and that the overall debt is manageable.

Other Factors to Consider

While income and debt are the primary factors in determining how much you can borrow, lenders will also look at the size of your deposit. The more you can put down as a deposit, the better your chances of securing a mortgage with favourable terms, such as lower interest rates. In the UK, most lenders require a minimum deposit of 5-10% of the property’s value. However, putting down 15-20% or more can give you access to better mortgage deals.

You should also factor in the costs of homeownership beyond the mortgage itself. Home maintenance, insurance, council tax, and utilities can add hundreds of pounds per month to your overall expenses. Planning for these costs is vital to avoid overstretching your finances.

Why Pensioners have to pay income tax now

The 2024 budget has stated the the triple lock system will be secured which allows the state pension to increase in line with inflation so that pensioners are able to afford the rising cost of living. This rise has now set the state pension to, £11,502 from now.

The tax threshold is remaining steady at £12,570, so those who only receive the state pension will have no changes. Those who receive this as well as an additional private pension of £1,068 or more will be pushed into the tax bracket and have to start paying income tax.

Pensioners worry for their finances

Clarke and Peacock estimate that around 650,000 pensioners will now have to pay income tax.

The financial worries for pensioners now increase with the added tax and being able to afford the cost of living is already difficult on their low incomes.

Many worry about what they will have to do for this new rule. HMRC have stated that there will be no need for self-assessments as this is an automatic payment. However, the likelihood of incorrect tax codes means that claiming back overpayments will make contacting HMRC a necessity. This is a frustrating and worrying time for pensioners as they have to navigate their new finances.

If you are thinking about taking out a loan make sure you are considering it carefully and know what you are getting into. With any type of loan there are serious implications if you miss any repayments and find out you cannot afford to pay back to loan you agreed to.

To take out either of these loans you will have to have a good credit score so start by improving that if necessary.

Secured Loan

These are sometimes called Homeowner loans, second-charge mortgages or home loans.

If you take out a secured loan you will have to place a valuable asset as collateral, this is often property such as your house or a car depending on the value. This gives the lender security if you fault on your repayments.

If you cannot keep up with the repayments then the lender can sell you house or other valuable asset you placed as security.

When you apply for a secured loan you will receive the money quickly directly into your bank account. You will often have lower interest rates on a secured loan as you have given the lender security in the form of assets.

You can choose how long you have to pay back this loan and often giving yourself longer will be best as the monthly payments will be lower however the overall interest is then higher.

Personal Loan

For this loan you will not have to name any valuable assets however, you will be able to borrow less with a personal loan, usually up to £25,000.

If you miss a repayment or find out you cannot pay the lender back over time then you will face legal consequences.

If you do manage to meet the agreements then this could improve your credit score.

You can choose how long you have to pay back this loan and often giving yourself longer will be best as the monthly payments will be lower however the overall interest is then higher.

Taking out a loan is a serious financial decision and should not be made lightly, make sure you have all the information and are confident you will be able to pay back your loan in full.

As of March 2024 below are the best 2 year and 5 year fixed term mortgage rates.

With a fixed term mortgage you will not be affected by changing interest rates and you will often pay lower rates than if you were on a variable rate mortgage.

If your fixed term is coming to an end this year and you are worried about the rise in mortgage rates then make sure you are comparing the best deals.

2 year fixed term mortgages

Barclays

• LTV – 60%
• Interest rate – 4.5%

Natwest

• LTV - 60%
• Interest rate – 4.64%
• deposit – 40%

Halifax

• LTV – 60%
• Interest rate – 4.6%

5 year Fixed term mortgages

Natwest

• LTV- 60%
• Interest rate – 4.24%
• Minimum loan amount - £25,000
• Minimum Deposit – 40%

HSBC

• LTV - 60%
• Interest rate – 4.24%
• Maximum loan amount - £5,000,000
• Offers a 10% annual overpayment allowance

Is a 2 or 5 year fixed term better?

As seen above, currently 5 year fixed term mortgages offer lower interest rates meaning you will have to pay back less over time.

A 5 year fixed term is a long term commitment so you have to make sure you will be able to make your repayment for the whole duration.

Pros of a 2 year fixed term

• You will be able to switch lender to get a better deal after only 2 years so that when rates fall you can benefit.
• You are usually able to make over payments in a 2 year term meaning you will be able to pay off your loan quicker, saving on interest over time.

Cons of a 2 year fixed term

• You will have to remortgage sooner and could have to pay fees to do so.
• At the end of the two years, interest rates could be higher giving you a more costly rate.

Pros of a 5 year fixed term

• This offers you stability knowing what your monthly payments will be each month regardless of what happens to the base rate. This can help you with budgeting and financial planning.
• If you know your current financial situation won’t change and you are happy with the rate then this a great way to avoid the hassle for a while.

Cons of a 5 year fixed term

• If you want to take advantage of the changing interest rates then you will be unable to do so with this term.
• You will paying out for a longer time and so will have less disposable income.

Stay on top of your Credit card payments and avoid debt.

By using an app or online platform to track your business expenses you could save time and money in your business. In 2024 there are many apps to choose from, however make sure it is one you can trust. Why not trying an app for your personal finances too? Stay on top of your money to have stress- free finances.

Below are rated apps to give you seamless financial support and give you freedom to focus other aspects of your business.

As the higher cost of living has continued to stretch household budgets, the flexibility for consumers of buy now pay later (BNPL) deals has become increasingly attractive.

Recent research carried out by the Financial Conduct Authority (FCA) last October,  found that around 27% of UK adults has turned to BNPL in the six months to January last year.

This was a significant 17% higher than for the 12 month up to May 2022.

If you are looking to buy an item using BNPL there are plenty of issues to consider,  alongside potential pitfalls over failing to make  payments.

It’s also important to remember that BNPL is a way of borrowing so its best to ensure that you have a repayment plan in place.

The pros of BNPL deals

The one obvious benefit of BNPL services is that buying any priced item is more manageable, as payments can be spread out into smaller amounts.

Payments are allowed over the course of weeks or even months depending on the terms and conditions from a BNPL provider.

For example with Klarna you can pay for your item in three instalments, where the first payment is made at the point of purchase, with the outstanding instalments to be made every 30 days.

Typically any purchase that is made through BNPL is interest free, so zero per cent financing is a draw.

Increasingly consumers are also able to use BNPL services in store as well as online if a  retailer is signed up to a BNPL provider in the same way that you are, details such as email addresses and phone numbers would need to be provided to confirm payment.

While it is probable that a credit check will be performed when applying for BNPL, it is not likely to be a rigorous assessment of your finances and will nor be viewed by other lenders.

The cons of BNPL deals

Of course there are downsides to this and make sure that you do not believe that this is easy money and any debt will have to be paid back, as the credit checks are softer you may be approved for BNPL without being able to afford it.

Yet some BNPL providers do go the full distance and proceed with a full examination of your finances, this can potentially lead to your credit score being damaged if for example a deadline payment is missed if it cannot be covered.

The lack of regulation over the BNPL sector is a concern, and its important to be  aware that any agreement that lasts a shorter period than 12 months is not regulated by the FCA.

This means that if there area any disputes over unfair treatment then there is no consumer protection in place.

If you make a BNPL payment with a credit card it means that you are not covered by section 75, which allows you to ask for a refund if there is a problem with an item that costs between £100 and 330,000 where you have paid by credit card.

What happens if you miss payments?

A penalty fee can be charged if repayments are missed, where potentially debt collections agencies can be called in, depending on the approach from a BNPL provider.

Some providers may try and work out an alternative repayment schedule, such as rolling on a payment over to the next instalment deadline.

That is why it is so important to fully check what the penalties are from providers.

Klarna will try on two occasions to take the first payment, if it cannot be covered it will be pushed back to over to the second instalment.

If after two more attempts on the second payment that the costs still cannot be met, then it will be rolled on to the final payment.

At that point if the payments can’t be made then the debt collection agency is called in.

There is also a risk of being banned from using Klarna if payments are missed.

Clearpay say that late fees will be charged, but late payments will also be capped to help people recover and get back on track.

While Laybuy will take a considered approach where the circumstances over late payments will be taken into account, and look to find a solution by determining what payments can be made in the meantime.

If the situation continues for an unspecified period of time, then debt agencies are brought in.

More positively Paypal have a Buy now and Pay in 3 offer to consumers, and it makes it clear that there are no late fees involved if payments are missed.

We have recently seen lenders hike up the prices for mortgage funds causing millions of people a much higher rate on their mortgage bills with some at a staggering 7%.

The BBC informs us that banks such as HSBC, NatWest and Virgin Money are all increasing the cost of new deals.

Why are mortgage interest rates rising?

Interest rates continually change to help control inflation and ease the cost-of-living crisis.

The Bank of England sets the base rate, currently at 5.25% which is what it costs lenders to borrow the money to then lend out to customers.

If inflation is going up then interest rates will often follow to try and dissuade people from spending and lowering the demand.

Does this affect you?

If your mortgage term is set to expire this year then the higher rates could affect you when you remortgage. An estimated 1.6 million deals will expire in 2024, according to Banking Trade Body UK Finance and these will be affected by the change in interest rates.

Those on a fixed rate mortgage will not be affected as the rate was agreed at the beginning of the term and remains the same throughout.

If you are on a Tracker or standard variable mortgage then your monthly payments could rise substantially.

Find out What the Different Types of Mortgages are.

Ofgem has announced that from April 2024 the energy price cap is going to be reduced to £1,690 per year for a typical household. This will be £238 lower than the cap they set in January 2024 which was, £1928.

The price cap is the maximum amount energy suppliers are able to charge for each unit of energy.

Are you covered by the price cap?

You will be covered if you pay by, Direct debit, Standard credit, repayment meter and Economy 7 Meter.

The price cap covers 29 million households in England, Wales and Scotland stated by the BBC.

The price cap is based on a typical household which pays their bills by direct debit using gas and electricity. However, If you pay every three months by cash and cheque the price cap falling will not affect you and you will be charged more in April 2024.

How Long will this Price cap last?

Every three months Ofgem reviews the price cap and so in June 2024 the price cap could alter again.

Analysts at Cornwall Insight predict the price cap will see a small fall in July and then increase in October

Ofgem

This is the energy regulator for Great Britain which works to uphold energy regulations. They review the situation every three months and set price caps which energy suppliers must follow.

Why Capgemini partnered with American Express to create a single payment solution for its T&E spend worldwide

As a global leader, Capgemini delivers greater efficiency and operational excellence for its partners by harnessing the power and value of technology. For over 10 years, Capgemini has partnered with American Express to leverage a single payments solution that tackles all its business travel and expense (T&E) spend globally.

“Relevance, speed and fluidity are essential to us,” says Emmanuel Erba, Group Chief Procurement Officer at Capgemini. “They are the essence of our business, and a single payment solution helps us achieve these, making it easier for our teams across the globe to partner with our clients and keep us agile.”

As a global business working with clients across different industries, often on major technology and transformation projects that span many months or even years, the potential for financial complexity is huge. “Our business is one of scale, which risks creating fragmentation, friction, inefficiency and a lack of transparency. Wherever possible, we need to overcome this and create a better experience.”

With over 15,000 suppliers, there is a huge complexity of goods and services being delivered. Whether internal or external spend, achieving harmony between the business and its suppliers is vital to the smooth and successful performance of Capgemini – especially when it comes to day-to-day business T&E spend which represents hundreds of thousands of transactions. Equally, Capgemini’s financial team must ensure spending happens within its set policy and must find a way to manage a highly fragmented group of indirect suppliers.

A single payment solution was key to tackling this problem – offering Capgemini a single point of aggregation and consolidation for this typically low value, high volume spend, often undertaken through one-off suppliers.

“The solution makes it easier both in terms of transparency and traceability. Our aim is to digitise as many of the transactional activities that take place as possible, and ultimately enable the transparency that is needed to review what we spend in real time, as well as bringing simplicity for our people.”

Capgemini chose American Express to create the best possible experience for its workforce and to help it manage reconciliation and reimbursement easily and efficiently. Today, it drives T&E spend through more than 66,000 American Express® Cards in use across the world.

“We combine Amex with our expense management platform, which fully digitises the capture and reimbursement flow, giving us a real-time view over our external T&E spend.”

As well as the benefits for security and control, the American Express payment solution also provides Capgemini’s people with an enhanced experience. “When an employee books a trip or makes a purchase, the process is fully aligned and directly billed to the American Express Card of the employee.”

For the business’ finance and admin teams, the Corporate Card solution has clear benefits around reducing admin and time-consuming processes. But American Express delivers more than just a payment solution. “Amex have a broad view of the market and are always bringing to the table opportunities for us to streamline spend that we are not yet taking advantage of. These add tremendous value.”

Looking ahead, the partnership looks set to go from strength to strength, including increasing use of American Express’ virtual payment tool, which offers a user-friendly digital payment solution for small B2B value purchases without the need for a Card.

“At Capgemini, we are focussed on enabling the future that we all want. And for us, this is about making T&E transactions swift and easy, but also controlled, so our teams can focus on supporting our people and our clients and not admin.”

Sponsored content provided by American Express

With digitalisation rapidly progressing and affecting every aspect of our lives – from the way we play to the way we pay – eCash levels the playing field for cash payers.

Much of society is becoming increasingly cashless, with the volume of cashless payments globally expected to rise by 80% between now and 2025. But it’s vital to remember that underbanked and unbanked communities don’t have the luxury of bidding farewell to physical currency. Many people around the world simply don’t have access to a bank account or a debit or credit card.

By digitalising cash, we can offer marginalised, cash-reliant communities access to online payments and enable them to participate in the world of eCommerce and digital financial transactions. It also allows security seekers to pay in cash and avoid having to provide personal financial data online.

In fact, according to our latest Lost in Transaction research study, which examines changing payment habits and preferences, 52% of consumers globally reported that they don’t feel comfortable sharing their financial details online. And 68% said they prefer using payment methods that don’t require them to share their financial details when paying.

Digitalising cash for online transactions

eCash, which enables cash to be used for online transactions, provides access to the digital world to cash payers and security seekers. Popular examples include the prepaid solution paysafecard as well as the post-paid barcode solution Paysafecash.

Paysafecard comes as a voucher with a 16-digit code that can be purchased in various denominations at petrol stations, supermarkets and convenience stores. The balance can then be redeemed by entering the code at the online checkout. This solution is particularly popular in the world of online entertainment and includes a spending control aspect that appeals to consumers as they can only spend the amount they have previously purchased with cash.

Paysafecash payments are made by generating a barcode during the online checkout, which can then be scanned and paid for in person at a nearby payment point. This solution has become increasingly popular for online transactions such as rent and bill payments, loan repayments, cash deposits into wallet-based financial services as well as a cash-in/cash-out solution for banking.

Paying for essential services in cash

When it comes to rent, utilities, loans and countless other essential services, cash is still the most available and most immediate payment method for unbanked and underbanked communities.

While many are revelling in how online payment platforms have simplified the process, this same proposition presents a huge hurdle for typically low-income groups who must find a way to pay for these services using cash funds without the luxury of a simple bank transfer or credit card.

eCash can facilitate this process, boosting financial inclusion and reducing missed payments. It allows cash-reliant communities to enjoy all the benefits of paying for services online without having to become banked. They can simply select “cash” as a payment option on the checkout page, generate a barcode and settle the amount in cash at a nearby payment point.

Bridging the gap between cash and banking

There are a number or reasons why people remain unbanked or underbanked and the high cost of traditional banking has certainly played a major role. While digital banks pose an attractive solution in terms of being less cost-intensive, they are still out of reach for anyone who relies heavily on cash.

Implementing eCash helps bridge that gap. It makes digital banking more accessible for cash-reliant consumers, providing them with an easy solution to cash-fund their accounts. Similar to choosing cash as a payment method during checkout, in this case, a barcode for a cash deposit can be generated in the digital bank’s mobile app. The barcode is then scanned at a payment point, the consumer pays the balance in cash and the amount gets credited to their digital bank account.

This also works for other financial service providers that utilise eCash for cash-funding their accounts, providing users access to any number of app-based budgeting and money management tools, setting up savings pots, or transferring money easily to friends right from their phone.

Beyond digital banking, eCash can also enable greater access to cash services in partnership with traditional banks. With bank branches closing and the availability of cashpoints decreasing, eCash payment points at participating retail locations can also be used to withdraw money. To do so, users would follow the steps above, generating a barcode in the banking app for the desired amount.

Paying with cash online

Taking it a step further, eCash doesn’t need to be limited to merchants and service providers who have integrated it as a payment solution. In combination with digital wallets like Skrill and NETELLER, eCash can open the door to online shopping in general.

Users can simply choose paysafecard or Paysafecash to deposit money into either of these digital wallets. This, in turn, allows consumers to use their cash funds with merchants that have integrated Skrill or NETELLER. They can also use prepaid credit cards available through these digital wallets to make payments literally anywhere.

Making progress inclusive

While there is no stopping digitalisation, it doesn’t have to go hand in hand with financial exclusion or remove cash from the payment mix. eCash is a powerful tool to mitigate the challenges of an increasingly cashless world, providing those who continue to rely on cash the ability to pay online for anything from online shopping to essential services.