Changes will take effect immediately
Hodge Bank, a commercial banking company, has announced that it will be making changes to the criteria for its later life products, in response to issues concerning affordability.
“Affordability continues to remain a challenge for mortgage customers across the market as interest rates remain high and the cost of living continues to rise,” said Louise Swainston, head of mortgage risk at Hodge.
Emma Graham, business development director at Hodge, explained that the changes to the criteria were part of the bank’s pledge to work with its intermediary partners to make products which will fit their clients and will be able to complement the range of incomes that it accepted.
What were the changes?
Graham said that the later life products of Hodge allowed debt consolidation and assessed interest only mortgages on an interest only basis. She asserted that the bank was helping their intermediaries in navigating the current issue of affordability through changes in their criteria.
The changes in Hodge’s later life products criteria are:
- Increasing income multiples on a purchase and remortgage on later life products - with capital raising from 4.49 to 5 times for interest only and from 4.49 to 5.5 times on repayment;
- Reducing the stress rate for pound for pound remortgages;
- A reduction in living costs to reflect the reduction in the energy cap from 1st October;
- Accepting a life insurance policy to support affordability under the death stress test.
“To help support our intermediary partners and their customers meet affordability hurdles, we have factored the news of the decrease in the OFGEM energy price cap into our affordability assessment, as well as reducing our stress rates for like for like remortgage borrowing,” said Swainston.
Graham commented: “We have developed this package of supporting criteria enhancements to help customers, particularly those who are looking to remortgage, with any affordability issues in mind. In particular, we believe the relaxation of the stress testing will be beneficial to many customers at a time when they need it the most.”
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