MBT Affordability Insights: Will lenders relax affordability?

There has been much talk around the Bank of England’s decision to relax stress rates for lenders, but how will it all translate in the real world for brokers and borrowers? With the rise in living expenses and large hikes in mortgage rates, just how relaxed are lenders going to be?

Related topics:  Blogs,  Mortgages
Mortgage Broker Tools
8th July 2022
equity release house plan mortgage sign house paper
"For the first time in many years clients are wincing at the new mortgage payments, with house prices remaining high and wages not anywhere near inflation"

For the first time in many years clients are wincing at the new mortgage payments, with house prices remaining high and wages not anywhere near inflation, the market has all the signs of slowing down, with a greater emphasis on remortgage business as borrowers worry about the future. Also, recent research has shown that were 16 lenders willing to lend 5 times income or more for a 75% LTV case, albeit on cases where the client’s income was in six figures, but this was before the Bank of England’s recent announcement.

Research also shows that those clients on lower incomes are being adversely affected from the affordability perspective because of the increase in ONS figures and higher rates will only worsen this. Data analysis from thousands of cases researched through MBT Affordability in April has shown that 29% of mortgage applicants whose household income is less than £62,000 were offered a loan size smaller than they requested. This compares to just 12% of mortgage applicants with a household income of between £62,000 and £100,000.

At this point, it is still unclear what stress rates lenders will move to and how quickly, but it’s likely that most will first of all wait to see how the market pans out over the coming months before they decide where they need to be. Consequently, we are likely to see the gulf between low and high income clients widen still further.

It’s unlikely that we are going to see 7 times income very soon, if indeed ever. But one thing that recent years have taught us is that it is that the future is completely unpredictable. Set against this uncertain backdrop, detailed data analysis is even more vital for lenders in setting their affordability calculators and thorough research from across the market is a necessity for any broker who wants to secure the most suitable mortgage for their client.

More like this
Latest from Property Reporter
Latest from Protection Reporter
CLOSE
Subscribe
to our newsletter

Join a community of over 30,000 intermediaries and keep up-to-date with industry news and upcoming events via our newsletter.