Affordability made simple

8 September 2017 • Products & Services

We've simplified our affordability calculation

How are we making things simple?
  • Net Income can now be used in full 
  • The stress rate applied will be 3% above our Standard Variable Rate, currently 4.74


How will this effect your cases?
  • On submission of your DIP our affordability assessment will be updated with the new stress rate 
  • You will no longer have to worry about having an income buffer for your applicant(s)
  • We will still use Office of National Statistics (ONS) data as a guide for affordability but will continue to rely on you to input accurate expenditure detail after conducting your own affordability assessment


This change is being made as a result of your feedback and the Financial Policy Committees (FPC) recent recommendations concerning affordability in their June meeting.
What did the FPC say? 
When assessing affordability, mortgage lenders should apply an interest rate stress test that assesses whether borrowers could still afford their mortgages if, at any point over the first five years of the loan, their mortgage rate were to be 3 percentage points higher than the reversion rate specified in the mortgage contract at the time of origination (or, if the mortgage contract does not specify a reversion rate, 3 percentage points higher than the product rate at origination). This Recommendation is intended to be read together with the FCA requirements around considering the effect of future interest rate rises as set out in MCOB 11.6.18(2). This Recommendation applies to all lenders which extend residential mortgage lending in excess of £100 million per annum.’