How Your Debt-to-Income Ratio Could Add £60,000 to Your Mortgage
The £60,000 credit card mistake homebuyers don’t realise they’re making
As mortgage rates remain high, many first-time buyers are discovering that their credit card balances could quietly determine whether they’re approved, or how much they pay.
Rising borrowing among under-40s means more applicants are falling foul of a key lender test known as the debt-to-income (DTI) ratio. This overlooked metric measures how much of a person’s income is already tied to debt repayments and even small balances can make a big difference. A one-percentage-point increase in mortgage rates could add up to £60,000 in extra interest over a 30-year term.
Us at Updraft, experts in helping people manage their consumer credit, shares how many consumers are unaware of how credit card borrowing can affect their DTI ratio and their mortgage affordability.
The hidden number lenders really care about
Updraft shares that as online searches for “will mortgage rates go down” are up by 900% in the UK in the past five years, there is a clear sign that financial uncertainty and affordability pressures are driving growing public concern about the cost of borrowing and access to homeownership.
Aseem Munshi, Our founder at Updraft, comments: “Your DTI ratio measures how much of your income goes towards paying off existing debts like credit cards, car loans, or student loans, compared with what you earn each month. Most mortgage lenders want that figure below 43%.
“If it’s higher, even slightly, they might still approve your loan but at a worse rate. That small change could cost you far more than you think.
“Considering everyday costs are rising, more people are relying on credit to bridge the gap between paydays. According to industry data, credit card debt among under-40s, the age group most likely to be buying their first home, has risen steadily over the past year, pushing many closer to that threshold.”
A 1% difference could cost £60,000
Even if a borrower isn’t rejected outright, higher DTI ratios can mean higher rates.
Aseem shares an example: “Let’s say two first-time buyers each take out a £250,000 mortgage over 30 years. The one with a strong credit profile and low debt might qualify for a 7% interest rate. The other, with a few thousand pounds sitting on credit cards, might be offered 8% instead.
“That 1% difference adds up to more than £60,000 extra interest over the life of the loan. Even on smaller mortgages, the gap can easily top £30,000 to £40,000, all because of how lenders perceive your debt load.”
“A small balance can have a big impact”
Aseem says many aspiring homeowners could be underestimating the hidden impact of everyday borrowing:
“People are often surprised to learn that even a modest credit card balance can make a big difference when applying for a mortgage. Lenders look closely at how much of your income is tied up in repayments, not just your credit score. A high DTI ratio can quietly limit your borrowing power or push you into a higher interest bracket.
“Getting on top of your credit card debt isn’t just about saving on interest now, but about improving your future borrowing position. Reducing those balances could literally save you tens of thousands over the course of a mortgage.”
Final Thought
Want to take control of your money? If you’re looking to consolidate credit card debt and cut down on high interest, download the Updraft app today.
Loans from 14% APR. 24.6% APR Representative.
24.6% APR Representative based on a £10,000 loan over 60 months at 19.9% fixed interest p.a. Monthly repayment: £277.60. Total repayable: £16,656 (inc. £500 fee). Subject to status and affordability. Consolidating debt may increase the term and total amount repaid.
All figures are representative, the rate you are offered will depend on an assessment of credit worthiness and affordability. Terms and conditions apply.
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