Act promptly for optimal affordability

the word unaffordable with a pair of scissors cutting off the U N
Published on 5 July 2023

Many lenders across the UK are reviewing their affordability models in response to the recent rises in the cost of living and the 13th consecutive increase to the Bank of England base rate. As a result, prospective homeowners and people who are thinking about remortgaging my face reduced borrowing capacity in the coming weeks. So, if you’re coming to the end of a fixed rate deal or have been on a tracker mortgage and under considering fixing now is a great time to speak to us.

The impact of inflation and rising living costs have prompted lenders to reassess their affordability criteria. Lenders use their own financial models to determine anticipated costs associated with owning a property. All lenders have their own sophisticated financial models that they use to determine monthly affordability. Based on the significant adjustments that have happened recently to household expenditure figures, many are making changes to their models. The models are used to determine whether a borrower is financially capable of repaying a mortgage loan. These models assess various factors such as the borrower’s income, expenses, credit history, and other financial obligations to estimate the amount of mortgage debt the borrower can afford.

Lenders use mortgage affordability models to mitigate risk and ensure responsible lending practices. By evaluating a borrower’s financial situation, these models help lenders determine the maximum loan amount that can be given to the borrower without putting them at excessive risk of defaulting on their mortgage payments.

In light of these developments, we strongly recommend acting quickly to benefit from the current affordability criteria. Particularly for those people who are planning to purchase in the short term and those looking for a remortgage in the next six months. By securing a deal now, applications will be processed before the updated affordability models take effect.

One prominent lender recently announced their plans to adapt to the changing financial landscape. Following the Bank of England’s base rate increases in May and June, the lender has revealed their intention to raise the standard residential affordability rate. They will also be updating the household expenditure figures that they use in their monthly affordability calculators. Many other prominent lenders have suggested they will follow suit. These adjustments confirm an industry wide response to the rapidly evolving economic conditions. As these changes can be complex and difficult for organisations to update and implement.

As borrowers face the potential prospect of reduced borrowing capacity, the team here at 177 Mortgages is ready with the expertise to guide clients through the shifting lending landscape. Our commitment to personalised guidance and our deep understanding of lender’s requirements ensures that individuals can secure the best possible mortgage deal, in what is becoming a rapidly changing market.

Now really is the time to take immediate action for any prospective buyers or those considering remortgaging. Here at 177 Mortgages we’re open seven days a week. We specialise in helping our clients navigate the complexities of the mortgage industry, to ensure that they secure the best mortgage deal for their unique circumstances. If you think we can help or have any concerns about affordability, then please get in touch today, and remember all our services are fee free.

177 Mortgages and 177 Protect are open 7 days a week. We’re always happy to talk through your mortgage, specialist finance and protection needs in more detail. If you’d like to book an appointment or simply find out more information, please get in touch.

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