MBT Affordability Insights: 6 ways to maximise loan size

With the backdrop of ever-increasing household costs feeding through into income and expenditure calculations, affordability is being squeezed from all sides, especially for those earning lower incomes. So, what options are there for brokers who want to maximise the amount their clients are able to borrow? There are more ways than you might think to achieve the desired outcomes for your clients. Here are just some of them.

1. The five-year fixed rate "blag"

Since last summer, lenders do not have to apply a stress test to a rate that is variable or fixed for less than five years, but many still do enhance affordability where a client takes on a five-year fixed rate, simply because of the medium-term stability it provides. Most will include a relevant question on their affordability calculator, and some will give a 'range' for the affordability result. This is an important option to consider, even when faced with clients who think that rates will be down again soon and so are asking for two-year fixed rates.

2. Professional clients

Many lenders are starting to enhance affordability for ‘professional' clients. The acceptable occupations vary between lenders, but generally speaking the list has expanded way beyond, just doctors, dentists, solicitors, etc. Again, some lenders have the question on their calculator, whilst others will require a conversation, but these lenders can be a good choice for a suitable client.

3. Limited company directors

The self-employed have been hit fairly hard by lenders in recent years, but a limited company director has seven different ways their income can be looked at – so, in many ways, they have more options than any class of borrower. This is mainly based around the use of retained profit, but there are now at least five lenders that will take net profit before tax plus salary, so always look at all the options for clients. It’s often worth talking to your accountant connections to demonstrate how you can help their clients.

4. CIS contractors

There are now 10 lenders that take the gross weekly wage for CIS contractors and treat the client as employed, which often means an annual income of circa £50,000 being used for affordability, rather than a typical net profit figure of circa £35,000-37,000 – and this obviously increases the loan size available.

5. Higher incomes

Clients with incomes of more than £100,000 are very well catered for with 16+ lenders allowing five times income and at least six allowing up to 5.5 times. These clients do need a decent deposit, but their extra net disposable income is recognised by an increasing number of lenders. So always check with those lenders happy to help.

6. Like-for-like remortgages

Where a client is looking to just swap lenders on their existing mortgage balance and not raise any extra funds, many lenders will allow up to 5.5 times income. Many are so-called 'mortgage prisoners' and may not be helped under that scheme but could find a lender that might help. This is especially true for clients on lower incomes, who are not eligible for the higher income multiples described above but can now have access to new rate different lenders. This is excellent news for those who are currently paying their lender’s SVR, with the possibility of rates rising still further.

So, as you can see there are many ways of enhancing affordability for clients today, but you do of course have to have been able to recognise all these options across the market. The only accurate way of doing this is to make use of technology and let an affordability platform do the heavy lifting for you. Just make sure it’s a platform that covers all of these options as some will be more comprehensive than others.