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Lenders Adapt Their Affordability Assessments – Act Soon

Finding out how much of a mortgage you can afford is one of the first things you need to do when it comes time to looking for a property. It’s crucial you know before finding your dream home to avoid disappointment as everyone is subject to the same affordability assessments from mortgage lenders. Here’s more about the affordability assessment.

This article does not constitute advice. Professional advice should be taken prior to acting on any part of it. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.

What’s an affordability assessment?

After switching from a loan-to-income ratio (lenders basing the amount you could borrow based on a multiple of your income) approach to assess affordability in 2014, lenders settled on capping the loan-to-income ratio at four and a half times your income.

On top of your income, lenders also evaluate your ability to afford the mortgage based on other personal and living expenses in a more comprehensive affordability assessment.


The “stress test” helps lenders determine whether or not you’ll be able to repay your mortgage without any issues. The test includes the possibility of rising interest rates and possible life changes like redundancy, taking a career break, or even starting a family.

You’ll need to do some prep work so you’re prepared for everything the lender needs in order to determine if they will lend to you.

Your income — everything from basic income, income from pension and investments, child maintenance and financial support from ex-spouses, and any other earning all need to be accounted for in the form of bank statements, business account, and tax records.

Your outgoings – lenders also evaluate your outgoings. Credit card debt, loans or other credit agreements, maintenance payments, insurance, and other bills are all part of the review. You might also need to provide estimates for living costs and other expenses. Make sure you have documents to back up all this information, too.

Hypotheticals – Not only do they take into account set income and expenses, but they also look at possible scenarios that might happen to see if you could still afford your mortgage should they occur. Interest rate increases, loss of your (or your partner’s) job, being unable to work due to illness or injury, or a life change that would change your finances significantly.

What’s changing?

Lenders are already lowering their affordability assessments to accommodate reduced income after the global pandemic wreaked havoc on the world.

While income is the key, it is not the only factor used in determining affordability. As it stands, if you meet with lenders now, they’ll be reviewing information from 2018/19 or 2019/20 to make their assessment. There’s a chance that your income will be lower due to the current climate, so your borrowing capacity could be affected. To combat the potential rejections down the line, you should act now.

Act Now

If you’ve been toying with the idea looking for a new home or rental property, or if your introductory rate is coming to an end and you’re looking into remortgaging, now is the time to do it. There’s currently a major push from the top-down to do whatever it takes to kick-start the economy’s recovery. Current temporary cuts in Stamp Duty Land Tax will help the housing market get back to where it was before coronavirus.

The affordability assessment is a rigorous process with ever-changing guidelines, but working with a specialist broker could make all the difference. As soon as you’re ready to start your property hunt, schedule a mortgage review with Chris, our mortgage expert, so he can help find the best deals from the right lender for you. Contact us today.

Need help to secure a low-cost mortgage?
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Dental & Medical Financial Services have been helping doctors and dentists with finding low-cost mortgages for your home and investment properties for over 25 years. Call Chris to discuss your options.

Tel: 01403 780 770


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