MBT Affordability Insights: Staying on top of affordability changes

Rate is always the first lever to pull, and we have seen that LTV is another key factor once you start getting about 80%. Now it looks like tinkering with affordability calculation, either by reducing income multiples of changing the way they treat different types of income, is being used more and more by lenders as a way to stem the flow of business.

Several major lenders have reduced their maximum loan to income (LTI) ratios to 4.49, even at fairly low LTVs – as low as 60% in one case. And most recently, both Virgin Money & Clydesdale Bank restricted LTI to 4.49 for those clients earning £50k or less. Their affordability calculators now reflect this change.

Many lenders are also being much more cautious about how they account for bonuses and commission and different employment sectors are being treated in different ways, as underwriters try to understand how Covid-19 will impact these sectors going forward. This caution can be attributed to the pandemic, of course, but it would be interesting to see if the same level of rigour were to be applied if the market was quiet.

So how do brokers keep up with such a fluid scenario? Often lenders will make changes without a great deal of communication, so it’s impossible to stay on top of the latest information all of the time. Fortunately, this is where technology can help.

There are platforms, like MBT Affordability, which can enable you to carry out affordability calculations with results from across the market. It uses live calculations for the lenders’ own platforms, which means that it can pick up on even subtle changes that could have a big impact on affordability outcomes.

Without technology like this, in an environment where lenders continue to adjust their lending appetite and tweak their calculations, identifying the right lender for your clients can prove a time consuming and difficult task. So, why wouldn’t you let technology take the strain and arrive at more suitable recommendations, more quickly?