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MBT: Affordability contracts for the self-employed

Mortgage Introducer

August 9, 2021

Mortgage affordability options for the self-employed contracted again in July as the average maximum loan size available to a self-employed applicant hit a five-month low, The MBT Affordability Index has revealed.

Analysis of real cases processed through Mortgage Broker Tools (MBT) shows that in July, the average maximum loan size available to a self-employed applicant was £221,000 – a fall of more than 5% on June and the lowest level since February.

Similarly, the lowest average loan size available to a self-employed applicant fell to just £90,452 in July – a decrease of nearly 17% on June and the lowest level since November last year.

The data also showed that fewer self-employed cases are considered to be affordable by lenders. Just 67% of self-employed enquiries were considered to be affordable, which is the lowest level since February.

This trend was also reflected across the whole of the market, which otherwise showed a stable affordability picture.

In July, 72% of mortgage enquiries were deemed to be affordable, which is the lowest level since June 2020. At the same time, the maximum average loan fell very slightly from £243,250 in June to £243,055 in July and the minimum average loan dropped by just 3%.

Tanya Toumadj, CEO at Mortgage Broker Tools, said: “The latest edition of the MBT Affordability Index shows some interesting trends. It’s clear that the self-employed continue to struggle to demonstrate the affordability they need with some lenders, with both average available loan sizes and the percentage of affordable cases dropping to their lowest levels in months.

“Similarly, while average available loan sizes have remained relatively stable across the whole of the market, the number of lenders that are deeming applications as affordable has also fallen to its lowest level since last summer. So, how do we interpret these results?

“First, it’s important to acknowledge that, more often than not, there is at least one affordability option to meet a client’s requirements, whether or not they are self-employed. However, we’re seeing increasing divergence in the ways that lenders calculate different elements of affordability and it’s delivering a greater spread of results.

“So, it’s more important than ever that brokers carry out comprehensive and accurate affordability and criteria research before starting an application. This can prove the difference between a mortgage enquiry successfully progressing to completion or falling at the first hurdle.”


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