You are here: Home - Mortgages - First Time Buyer - News -

Lenders are making it easier to get a mortgage

Written by:
More lenders are relaxing affordability criteria to make it easier for borrowers to qualify for mortgages and larger loan amounts, brokers have suggested.  

A number of lenders have openly increased loan to income multiples in recent weeks, including Barclays, Platform and Cambridge Building Society.

And Coventry for Intermediaries recently changed its affordability model with the aim of making a “real difference” to the maximum amount customers could borrow, especially those earning between £25,000 and £70,000.

As part of the changes, the lender now takes child benefit into account and fewer items are considered ‘essential living costs’.

Coventry also no longer takes into account the living costs of financially independent adults living in the property.

Kevin Purvey, director of intermediaries at the lender said the changes are “all positive” and could make a real difference to customers.

But on top of the providers that are openly talking about changes, a number of lenders are also quietly relaxing criteria, according to brokers.

Lenders up the competition for borrowers

Providers are under pressure to hit lending targets when house purchase transaction levels are falling, which is in part behind the criteria changes, according to Nick Morrey, product technical manager at broker John Charcol.

He added: “To get a slightly larger slice of a shrinking market means lenders have to be more creative in how they get that slice.

“Dropping rates is not always an option, as margins are tight enough as it is, and things are very competitive in that space already. So that leaves criteria and affordability.”

Morrey also said that a more relaxed approach by lenders is good news for the market and doesn’t signal a return to conditions in the lead-up to the financial crisis.

He said: “If everyone can borrow a little more it may well help the housing market, which no-one really wants to see crash.

“This is just lenders getting back to some of the rules they used in the past – not all.

“Clearly lenders and brokers have a duty of care to borrowers to try and prevent them from over-committing, but we also try to help people with home ownership.

“I hope these changes will enable the latter without compromising to produce the former.”

Common sense changes are welcome

Brokers said the more relaxed approach being taken by lenders is in many ways common sense and good news for the market.

Greg Cunnington, director of lender relationships and new homes at broker Alexander Hall, said one of the largest issues in today’s market is the purchase price to earnings ratio, meaning that maximum borrowing to a client is key, especially in London.

Cunnington added: “As lenders face increased competition they are having to address where in the risk curve they are most comfortable making criteria amendments.

“This year has seen an increased move to relax affordability models and to increase maximum income multiples, albeit typically with loan to value or minimum income requirements, which I feel is very welcome.”

Sebastian Riemann, mortgage consultant at Libra Financial Planning, said: “Coventry is certainly on the right track and hopefully we will see others follow their example in the not so distant future.

“There are certain lenders such as Natwest, and more recently Santander, that have taken a more balanced view on optional deductions on payslips similar to that which we have seen by Coventry.

“It would be nice to see more lenders taking this common sense approach as clients often do have a choice whether to take these optional extras offered by employers.”


Related Posts

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Big flu jab price hikes this winter: Where’s cheapest if you can’t get a free vaccine?

Pharmacies, supermarkets and health retailers are starting to offer flu jabs ahead of the winter season, but t...

Is now the time to fix your energy deal?

Fixed energy tariffs all but disappeared during the energy crisis. But now they are back with an increasing nu...

Everything you need to know about the pension triple lock

Retirees are braced to receive another bumper state pension pay rise next year due to the triple lock mechanis...

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

The best student bank accounts in 2023: Cash offers, tastecards and 0% overdrafts

A number of banks are luring in new student customers with cold hard cash this year – while others are compe...

DIY investors: 10 common mistakes to avoid

For those without the help and experience of an adviser, here are 10 common DIY investor mistakes to avoid.

Mortgage down-valuations: Tips to avoid pulling out of a house sale

Down-valuations are on the rise. So, what does it mean for home buyers, and what can you do?

Money Tips of the Week