Affordability

We use affordability as a way of assessing how much we will lend. Please refer to our Affordability Calculator.

We have a maximum loan to income (LTI) calculation of:

Income	LTV	Income Multiple*
More than £100,000	<85%	5.50 times income
More than £100,000	>85%	4.49 times income
More than £60,000	<85%	5.00 times income
More than £60,000	>85%	4.49 times income
Less than or equal to £60,000	<90%	4.49 times income
Less than or equal to £60,000	>90%	4.25 times income

*Where one or more applicants are self employed, the maximum LTI is restricted to 4.49 times income.

The amount of income used in the affordability calculation is defined as a percentage for all income types. You’ll find more information here 'Treatment of Income'.

A stress rate of 9.75% interest is used for residential lending. First Time Buyer applications are stress tested on a rate 1% lower than our standard residential products.

Debt to income

When determining affordability, applications will be declined when the credit score confirms the applicant has:

Opened three or more accounts e.g. credit card or personal loan in the last six months, OR
Their unsecured commitment balances have increased by more than 20% in the last three months

AND EITHER:

The total monthly payments for unsecured commitments are more than 20% of gross monthly income - based on combined unsecured commitments and the amount of income used in affordability for joint applications. OR
The balance of total unsecured commitments is more than 100% of gross annual income - based on combined unsecured commitments and the amount of income used in affordability for joint applications.

Commitments and outgoings

As well as considering the applicant’s income for affordability, we will also need to consider any regular outgoings that they are committed to.

These include but are not limited to:

Background Buy-to-Let properties

In Residential affordability calculations, 60% of any surplus rental income from self funding background BTL properties will be included. To be considered as self-funding, 69% of the total rental income must be greater than the total monthly payments of all background BTL mortgaged properties. This is based on interest only at a stressed rate of interest of 6.50%.

Credit commitments

Outstanding mortgage balances
Outstanding credit card balances including mail order, charge cards & store cards
Hire purchase / Car lease agreements
Loans including student loans
Overdrafts
Buy now pay later loans including short term agreements with online credit providers such as Klarna, Clearpay, Laybuy and Paypal Credit.

Non-credit commitments

Ground rent/service charges
Maintenance
Child care
Rental/Tenancy
School/University fees
Shared Ownership rent.

Other costs

These are other commitments which have significant costs and are related to the following:

Care of a family member not residing in the property, for example care home costs for a parent
Associated running costs (as a minimum council tax and utility bills) from background properties that are not rented out, regardless of whether the property is mortgaged or mortgage free.
Other education costs, for example the applicant themselves is studying for a degree
Significant hobby costs that the applicant is fully committed to and would not want to relinquish, for example stable costs for owning a horse.

These other commitments must be ones that the applicant would be unable or unwilling to give up without a detrimental impact to their family, lifestyle or income.

Non-credit commitments which can be cancelled without a significant impact and have relatively low costs would not need to be keyed.

Pension contributions do not need to be keyed as a commitment.

Significant commuting costs and accommodation away from the home should be captured and considered for affordability. Our affordability model factors in average costs based on ONS data.

Affordability must also include future changes to income. Please refer to Future Changes , for more information.