Changes to enable more customers to access "higher multiples"
Lender Virgin Money has announced improvements to its affordability calculations. The lender noted this meant “for most customers, we can now lend more today than we could last week.”
Some brokers applauded the lender’s move, while some believed it was a move to gain more market share, according to a Newspage report.
"This move by Virgin Money is a step in the right direction, and where the mortgage is affordable this should reflect a common sense approach,” said Justin Moy, managing director at EHF Mortgages. “With Nationwide’s improvement for self-employed borrowers also announced this week, it’s evident lenders are looking at more than just rates to boost their application numbers.”
However, there were those who were unimpressed. “It's great to see lenders being more flexible in their lending policy. However, it's disappointing the increased loan-to-income multiple of up to 5.5 x income doesn't apply to the self-employed, other than to contractors,” said Graham Cox, founder of Self Employed Mortgage Hub. “Company directors, LLP partners and sole traders are left languishing at the usual 4.49 income multiple."
What were the enhancements about?
Some rules and restrictions have been eased out to give more customers access to “higher multiples.” The limit for contractors is no longer 4.49x. High earners and customer remortgaging with no additional borrowing now have access to 5.5x multiple.
The following multiple apply to purchase or remortgage with additional borrowing:
- Income under £50,000 – 4.49x
- Income £50,000 to £74,999 – 5x
- Income of £75,000 or more – 5.5x
The new multiple of max 4.49x LTI apply at all income levels, if any of the following apply:
- Over 85% LTV
- Any part of the mortgage is interest only
- Any applicant is self-employed (not including contractors meeting our contractor policy)
- Shared ownership
In determining the £50k/£75k income levels, and when applying LTI multiples, Virgin noted to include the following of the two highest earning applicants: basic pay, 60% of allowable variable income, and 100% of pension.
The lender said income level and self-employment would not affect LTI limits for a remortgage with no additional borrowing. The LTI is max 4.49x, if any part of the mortgage is interest-only.
Any thoughts about the enhanced affordability calculator? Leave your comments below.
