MBT Affordability Insights: Signs of recovery

The intense demand from buyers in recent months hasn’t been met by an equal supply of property onto the market and so there has naturally been upward pressure on prices. But the good news is that affordability is recovering well, with many more lenders now happy to accept ‘variable’ income in some form compared to recent months.

According to the latest MBT Affordability Index, the average maximum loan offered to self-employed customers is now £233,221 – which is more than 22% higher than its low point last April. However, securing a good loan size for self-employed applicants remains a tricky area, with many lenders still capping LTIs and LTVs, so it’s really important to carry out thorough research across multiple lenders as they will all have different ways of treating this type of income.

The issue of furlough income is one that is at last beginning to disappear and we’re seeing a lot fewer cases where this is a consideration. Although some lenders are continuing to take a more cautious approach to underwriting for customers who work in those industries that have been hit particularly hard by Covid.

Looking forward, the outlook for affordability is positive. In a less buoyant market, lenders will have to work a little harder and we are already seeing debt thresholds edging higher. This will help those clients who have increased their borrowing over the course of the pandemic to keep their heads above water. In addition, with five-year fixed rates falling to even lower levels, there’s also a chance we will see lenders start to enhance affordability even more in these areas.