This advanced model will be available immediately and is claimed to be among the most sophisticated used in the UK.
The calculator gives a more accurate assessment of income tax and national insurance payments, while adjusting for the number of dependents the borrower has and their household expenditure in relation to income. This makes it compatible with responsible lending requirements and principles for Treating Customers Fairly (TCF).
The advanced model further improves on previous calculation procedures by treating all stated income, (including non taxable incomes, such as maintenance payments and benefits) as 100 per cent, providing greater clarity with respect to various income sources. Individual financial contexts can now be more carefully assessed within SPML’s affordability based lending model. Customers with larger surplus incomes may be able to borrow greater amounts, while maximum advances for those already highly indebted with greater household expenditure will be reduced.
Roger Taylor, director of sales at SPML, said: “SPML switched to affordability based lending in November 2006 because of the greater flexibility it offers. It provides a far more realistic method for determining a maximum lending limit, taking into consideration an individual applicant’s personal circumstances. Affordability based calculations using this model are also much better equipped to deal with changing market influences and are better suited to a principle based lending environment where treating customers fairly is imperative.
“At SPML, we continue to believe that affordability based lending provides the clearest picture of a borrower’s financial situation. The affordability calculator is among the most sophisticated used in the UK, and delivers benefits to intermediaries and customers alike, by more accurately matching maximum loan amounts to the customer’s particular circumstances.
“This is particularly useful in the current market climate. At the moment, borrowers are seeking larger loans amounts to keep up with growth in house prices. At the same time, TCF principles are paramount and there is a regulatory emphasis on ensuring customers are not financially overstretched.”
