Affordability

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

A stress rate of interest of 6.60% is used for residential lending, with the exception of First Time Buyer applications which will be stressed at 5.60% due to a lower reversionary rate, and like for like remortgages (excluding cases where the customers is remortgaging a BTL property to residential) where a stress rate of 4.60% will be applied.

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

  • 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.
  • 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.

PLEASE NOTE: The affordability calculator will give a guide to the amount we would be willing to lend. However, as no credit search is carried out, please be aware that this amount is subject to change once the DIP / Full Application is keyed. We have a maximum loan to income (LTI) calculation of:

 

IncomeLTVIncome multiple
More than £40,000<85% 4.75 times income
>85%4.50 times income
Less than or equal to £40,000 <90%4.49 times income 
>90% 4.26 times income 

 

The amount of income used within the affordability calculation is defined as a percentage and can be seen for all income types in 'Treatment of Income'.

As well as taking into account 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:

 

How do you treat background Buy-to-Let properties for affordability?

In Residential affordability calculations, 60% of any surplus rental income from selffundingbackground 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 allbackground BTL mortgaged properties. This is based on interest only at a stressed rate ofinterest of 5.5%.

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.

 

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 or not 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 and expenditure.