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Affordability Stress Testing- February 2017

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Affordabilty Stress Testing:

February 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. Clients have student loan and credit card debts. Incomes £28,000 and £25000 + car allowance £500pcm respectively (wishing to borrow £225,000)

 

Nationwide £280,300
Halifax £280,250
Barclays £265,500*
Coventry £265,500
Kensington £265,500
Accord £264,910
Platform £264,910
Santander £262,550
Skipton £263,750
Leeds £254,700
NatWest £250,700
Virgin Money £237,500 (£295,00)**

*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 at 70%LTV – 2 dependent children, car loan and nursery fees.  Incomes £55,000 + £6000 car allowance and £45,000 pcm respectively (wishing to borrow £300,000)
 

Accord £463,963
Santander £463,653
NatWest £462,100
Halifax £460,665
Platform £453,490
Virgin Money £454,500
Skipton £453,250
Kensington £451, 260
Barclays £448,250
Coventry £437,200
Nationwide £417,600
Leeds £412,193


Since our last edition...
Comparing this affordability to January's test we can see that this month, Nationwide came out best on FTB lending whilst Accord are at the top for next time buyers.

                                   

There have been significant moves for both scenarios that are worth noting since our test in January. Nationwide have remained top for first time buyer which is to be commended, we can see that Accord and Skipton have both risen numerous places and increased their borrowing levels. It is also particularly interesting that Coventry have increased their affordability significantly in our first scenario, this is clearly positive for first time buyers.

Within our second scenario, Santander is the biggest mover, both increasing their borrowing and jumping up three places to second. We can see that Nationwide have fallen for next time buyer affordability. Halifax have remained consistent, placing in the top four lenders on both scenarios for the last six months. We should acknowledge that Accord place top of our next time buyer scenario again, their affordability is something to consider where perhaps you may not have previously done so.
In general, we can see that the majority of lenders have enhanced their borrowing amount since our January test. This might be because of the new PRA rules on Loan to Income calculations announced recently. Hopefully we may start to see some more positive moves in affordability in the future because of these changes.


BTL Affordability Stress Rate update

Since we saw interest coverage ratios and affordability changes due to the PRA having set out new rules for standardising Buy to Let criteria, there have been some changes and additions. We have captured these changes and updated our easy to read table of lenders new interest coverage ratio rates here

Affordability Hints and Tips 

As an addition to our usual Affordability document, I wanted to include some hints and tips relating specifically to affordability. The below can allow you to enhance income multiples:

Barclays- Clients can achieve up to 5.5x income where annual income exceeds £70k+ sole or joint £100k+,  subject to credit score (available to premier customers only)
Marsden- Clients can achieve up to 6x income where annual income exceeds £50k+ and 5.5x if their annual income is between £30k and £50k (professional clients only***)
Accord- Clients can achieve significantly higher than the average LTI and encourage Brokers to speak to one of their knowledgeable BDM’s who will give more detail.


***Accountants, Actuaries, Architects, Barristers, Dentists, Engineers, Medical Doctors, Optometrists, Pharmacists, Solicitors, Vets. 

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