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Affordability in the spotlight

Lewis Lenssen

January 17, 2020

Lewis Lenssen (pictured), managing director, Mortgage Broker Tools

A trio of news stories this week have put affordability firmly in the spotlight.

First, the ONS announced that average house prices in the UK rose by 2.2% in the year to November 2019, representing a monthly increase of 1.3% at a time when property price growth might ordinarily slow ahead of Christmas.

The data, which was taken from HM Land Registry figures, showed the average UK house price was £235,000 in November – an increase of £5,000 on the previous year.

At the same time, AmTrust said that the number of available 95% LTV products increased for the first time in two quarters.

So, property prices are increasing and there are a growing number of options for high LTV mortgages to help clients to borrow what they need.

The other element to consider is affordability, and this is where the third news story comes in.

Research by broker Private Finance found that workers who received a Christmas bonus and are looking to purchase a property in 2020 could boost their borrowing power by up to £33,000 by selecting a more bonus-friendly mortgage product.

Private Finance pointed out that mortgage products take bonus pay into account in varying degrees, with some lenders using 50% of the average bonus pay received over the past two years in their affordability calculations, while others can accept up to 100%.

In an environment where house prices have started to rise again, this variance in the way that lenders treat bonus income could be the difference between your client purchasing their dream home or having to settle for second best.

And it’s not just bonus income that can have a significant impact on the amount that lenders are happy to advance.

Lenders all have their own ways of calculating the affordability of PAYE employees, company directors, and contractors as well as different approaches to assessing outgoings like loan and credit commitments and properties in the background.

It’s impossible to know the nuances of all of these calculations and so the only reliable way to get an accurate picture of what your client could borrow with a lender is by using its affordability calculator.

If you want to research the market to understand the best available options you might then have to repeat the calculation a number of times.

Or, you could let technology take the strain.

When affordability is a consideration for your clients, an affordability research platform can save you time and potentially change your recommendation by providing you with fast and accurate affordability calculations from more than 30 lenders.

So, when affordability is in the spotlight, an affordability research platform can help your clients to have a brighter chance of success.


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