Affordability issues have plagued borrowers in recent months
Impact Specialist Finance recently launched a higher income multiple product, which is designed for clients who want to maximise their income when purchasing or remortgaging residential properties.
Borrowers’ affordability has been heavily impacted by market conditions of late, which was a key factor in the lender’s decision to launch a product with multiples between 5x and 6x a customer’s income, depending on their salary.
While Dale Jannels (pictured), managing director at Impact Specialist Finance, believes the specialist lender’s latest launch will only assist a small number of borrowers, he hopes more lenders will follow suit and offer similar products.
Reasoning behind launch
Borrowers’ affordability has been stretched in recent months, with the cost-of-living crisis hammering homeowners’ finances.
The number of affordability inquiries brokers received during the final quarter of 2022 rose significantly, with 7,642 queries over the last three months of 2022, up by 1,576 on the same period of the previous year, according to PRIMIS Mortgage Network.
With many lenders’ affordability calculations being affected in light of the rising interest rate environment, Jannels said the amount that most borrowers can borrow has been somewhat, and in some cases significantly, reduced.
Alongside the impact of the ongoing cost-of-living crisis and higher mortgage rates, Jannels pointed to the mini budget and the conclusion of the Help-to-Buy scheme as factors behind the rising number of affordability inquiries and concerns within the marketplace.
“Therefore, we are working with many of our lender partners to try to offer alternative solutions to help some customers borrow a little more than maybe they could have via traditional high street lenders,” he said.
Jannels added that he feels it is important even a few borrowers have this option, given the challenging environment.
Impact on the market
“This is not a mass market product and it is not designed to be revolutionary, it is more about providing a little more choice to brokers for their clients, in what is a tough environment for everyone currently,” Jannels said.
He added that lenders have a percentage limit on volumes they can lend over 4.5x loan-to-income (LTI), so he does not expect it to have a huge impact on the market, but believes it is an option for the right clients.
He added that there are also limitations on the accessibility of the product for customers, with borrowers needing to earn between £50,000 and £80,000 annually, have very high credit scores, and the maximum loan-to-value (LTV) being 85%.
The packager and distributor’s latest product is also only available through a select group of distributors.
Encouraging other lenders to follow suit
“Since the introduction of our product, we have seen at least one other lender come to market with a similar offering,” Jannels said.
He noted that the Bank of England base rate is unlikely to fall any time soon and, even when it does, he believes it will not fall as quickly as it has risen, and so he said the impact of reduced affordability is likely to have an impact for a while yet.
“I expect the specialist lending community to lead the way in such matters, as usual, and so I hope these launches will pave the way for others to either follow suit or dip their toes into addressing the affordability issues to help more customers in the medium to long term,” he said.
Do you think specialist lenders can help step in and provide solutions for borrowers struggling with affordability issues? Let us know in the comment section below.
