Affordability Stress testing- November 

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Affordability Stress Testing:
November 2016

Please find below my affordability tables for this month. Paradigm have been comparing the following thirteen Lenders quarterly since April 2014 using exactly the same scenarios each time. These tables enable you to judge which Lenders are leading on affordability in the first time buyer and next time buyer areas. 

Scenario 1 –  Joint First time buyer at 90% LTV – no dependants. Student loan and credit card debts. Incomes £28,000 and £25000 + car allowance £500
pcm respectively
 (wishing to borrow £225,000)

Nationwide - £280,300
Halifax - £280,250
Skipton - £280,000
Barclays - £265,500*
Coventry - £265,500
Leeds - £265,500
Accord - £264,910
Platform - £264,910
Santander - £262,550
Kensington - £253,620
NatWest - £250,700
Virgin Money - £237,500 (£295,000)**

*Barclays cap income multiples depending on LTV and overall profile of the case, this could affect the amount your client could borrow- e.g at 90% LTV, loan amount is capped at 4.5 times income.  The above amount reflects a cap of 4.5 x income as it is a 90% example
 **Virgin Money result is slightly skewed as they can lend up to £295,000 in the above example as a maximum borrowing for the clients and this will depend on credit score and overall profile

Scenario 2  Joint Next time buyer 70%LTV – 2 dependant children, car loan and nursery fees.  Incomes £55,000 + £6000 car allowance and £45000 respectively (wishing to borrow £300,000)

Accord - £463,963
Santander - £463,56
Halifax - £460,655
Platform - £453,490
Nationwide - £452,500
NatWest – £451,700
Skipton - £447,000
Barclays - £431,000
Kensington - £430,740
Coventry - £430,000
Leeds - £420,510
Virgin Money - £380,000*(£620,000)

*Virgin Money result is very skewed in this example as they can lend up to £620,000 as a maximum borrowing for the clients which is 6 x the client’s allowable income. This again will depend on credit score, purchase price of the property and overall profile.

Since our last edition...
Comparing this affordability to August's test we can see that Lenders have moved around the tables in terms of how much they will lend to first time buyers and next time buyers. Nationwide came out best on FTB lending whilst Accord remain at the top for next time buyers.

Our last test on this was in August so apologies for not updating you since then.  There has been some significant changes to the tables from the August results and it shows that Coventry have increased their appetite to lend more on the higher LTV scenario which is good news as we know coupled with some of Coventry’s unique selling points this makes good reading.  Accord still stand out on lending the most when a client has income over £50,000.  Accord are trying to improve their processes and are looking to adjust their criteria so that it is easier to do business with them. It will be worth considering them again even if you have had a poor experience previously. The Santander calculator now gives you a choice whether you wish to key in all the clients expenditure or use their quick reckoner, I did try both options and it gave me the same results. Nationwide, Skipton and Halifax still remain fairly stable in their calculations and all 3 Lenders have consistently come out in the top 4 lenders over the previous 6 months in the higher LTV scenario.
Virgin Money are also a very good lender on affordability but our tests do skew their results due to the fact that they now show the maximum lending that this client may be able to achieve. This maximum lending on both scenarios would put them top of both tables. The maximum lending figures take into consideration loan to values, purchase prices and the overall credit profile of the client. Please don’t forget to try out their affordability for yourselves as they may be able to achieve the amounts your client’s need.

Best regards,
Christine Newell
Mortgages Technical Director 
Paradigm Mortgage Services LLP

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