A new development for lender affordability models

Lewis Lenssen

May 22, 2019

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

When it comes to choosing the most suitable lender for a client, affordability is a key consideration alongside rate and criteria.

However, sourcing systems still work off of indicative income multiples that are provided to them by the lenders and these often don’t tell the whole story, particularly on more complex cases, so the results can often be inaccurate.

At MBT Affordability, we’ve developed a single calculator that automatically and intelligently completes individual lender calculators and collates the results.

This is a useful tool for providing individual brokers accurate answers to how much clients are able to borrow, but it can also help to advance the way that lenders develop their affordability calculations.

There are so many different variables that can impact the way that lenders assess affordability, particularly on more complicated cases that include complex income or outgoings, such as multiple incomes sources, company directors, IT contractors and self-employed applicants as well as those with existing loan and credit commitments or properties in the background.

The trouble is that, like intermediaries, lenders struggle to understand the complex affordability landscape.

Each lender has a unique affordability model that is based on a wide range of factors. They flex their models to reflect their lending strategies and historic loans but also to change their affordability position relative to their competitors.

Unlike rate, which can be illustrated with simple league tables, and even criteria for which there are tools that offer comprehensive filters, affordability can be more difficult to compare. A lender can, for example, offer high affordability for its target customers but lower affordability in segments of the market where it has less ambition and there are many variables that can be used to shape a lender’s appetite.

A tool like MBT Affordability therefore provides opportunity for lenders to more accurately assess their affordability against their competitors to identify opportunities where they are able to make a difference and stand out from the market.

Several lenders have already started to use the MBT Affordability platform to do just this and we are in negotiation with two more lenders on the development of a completely lender-centric affordability platform that can offer a transparent and user-friendly way to deliver the insights they need to improve their affordability proposition.

This will be a positive development for those lenders but could also provide brokers with a more targeted set of tools and ultimately benefit customers as it should enable the development of affordability models that are targeted more directly for their specific needs.

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