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Affordability Stress Testing- January 2017

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Affordability Stress Testing:  January 2017

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 £275,500
Barclays £265,500*
Accord £260,420
Skipton £258,250
Santander £258,100
Leeds £252,448
Kensington £252,360
Halifax £251,750
Coventry £249,800
Platform £249,195
NatWest £246,500
Virgin Money £237,500 (£277,500)**


*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 £277,500  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)

NatWest £462,100
Nationwide £453,500
Accord £452,971
Halifax £451,250
Santander £450,000
Skipton £449,000
Virgin Money £449,000
Kensington £446,760
Coventry £438,800
Platform £437,775
Barclays £435,250*
Leeds £428,481


*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

Since our last edition...

Comparing this affordability to November'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 for FTB lending and NatWest top the table for next time buyers.

                

 

Our last test on this was in November and there have been some significant moves  since then that are worth noting. We can see that Nationwide remain top for first time buyer lending and NatWest have risen five places to the top for next time buyer lending. Accord still remain within the top three lenders, making them consistently successful for both affordability scenarios. They have particularly good income ratios for clients earning over £50,000. 
As expected, Halifax and Santander have stayed pretty consistent, placing in the top five for both scenarios for the past ten months. Their affordability calculators are both very accessible and easy to use. 

I would again like to note that Virgin Money's  tests have skewed results due to the fact that they now show the maximum lending that this client may be able to achieve. The maximum lending figures take into consideration loan to values, purchase prices and the overall credit profile of the client, therefore you will gain different results for each client and Virgin Money are definitely worth considering for affordability. 

Overall, we can see that we have our consistent lenders but I think the main pointer here is that Nationwide and NatWest top the tables for affordability. 

 

Kind Regards 
Catherine Kennedy
Mortgages Technical Assistant

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