At Mortgage Broker Tools (MBT), as well as the data we analyse from the hundreds of thousands of mortgage enquiries that are researched through our affordability-first platform, we also track the affordability situation for a number of different client scenarios.
So, given the large hikes in interest rates over the last year, combined with the ongoing cost-of-living crisis, we thought it would be interesting to review seven different borrower scenarios so see what impact the changes over the past 12 months have had on their borrowing power.
We found that, of the seven cases we tracked, the number of affordable lenders has decreased over the last year.
On one of the cases the number of affordable lenders has remained the same and there is one scenario where there are now no affordable lenders when last year there were 18.
This reflects the results of our broker survey earlier this year, which found that nearly nine in 10 brokers (89%) said they had to work harder to secure the loan size their clients want than they did last year, while 94% of brokers said affordability has become even more complex in the last 12 months.
Here are the results of that review, including the maximum loan sizes that were available to clients in August 2022 and then again to cases with the same circumstances in July 2023. We also looked at the number of lenders prepared to offer the loan size requested for each case.
Self-employed sole trader
85% loan-to-value (LTV), £170k loan requested.
August 2022: Maximum loan £261,200 with 33 affordable lenders.
July 2023: Maximum loan £238,494 with 24 affordable lenders.
Conclusion: Fewer lenders have appetite in this area, and they are offering smaller loan amounts.
Complex Income – Ltd Co Director with a background residential property
67% LTV, 250k loan requested.
August 2022: Maximum loan £383,750 with seven affordable lenders.
July 2023: Maximum loan £441,487 with five affordable lenders.
Conclusion: There are now more lenders able to take net profit for affordability, which has helped to increase the maximum loan size. However, others have reduced their appetite and there are fewer options.
Lower income, including benefits
73% LTV, £145k loan requested.
August 2022: Maximum loan £155,467 with 3 affordable lenders.
July 2023: Maximum loan £155,468 with 3 affordable lenders.
Conclusion: There has been no change in this area.
First-time Buyer
90% LTV, £225k loan requested.
August 2022: Maximum loan £287,000 and 15 affordable lenders.
July 2023: Maximum loan £275,000 and two affordable lenders.
Conclusion: While the maximum available loan size hasn’t changed much, there are many fewer lenders with appetite in this area.
High Income (over £200k per annum)
75% LTV, £937,500 loan requested.
August 2022: Maximum loan £1,182,500 with 24 affordable lenders.
July 2023: Maximum loan £1,075,000 with 12 affordable lenders.
Conclusion: The maximum available loan size has fallen slightly but there are now only half the lenders with appetite in this area compared to last year.
Older clients, aged 68 and 57
August 2022: Maximum loan £447,249 with eight affordable lenders.
July 2023: Maximum loan £410,829 with five affordable lenders.
Conclusion: A slight drop in both the maximum available loan size and number of lenders.
Buy-to-let purchase, basic rate tax-payer, 5-year fixed rate at 75% LTV
August 2022: Maximum loan £289,455 with 18 affordable lenders.
July 2023: Maximum loan £171,996 with zero affordable lenders.
Conclusion: The starkest change in the last year as the pay rate on a buy-to-let mortgage has a more direct impact on affordability than residential.
Overall, it’s clear to see that there has been a contraction in affordability over the last year, and there are certainly fewer options for borrowers.
However, there do remain options and maximum available loan sizes have not been impacted by as much as many may have thought.
This means that those brokers who make use of affordability-first research platforms, such as MBT, continue to have a good chance finding an affordability solution to meet the needs of their clients and help them achieve their objectives.
Lenders can also make use of this technology. Our survey earlier in the year found that more than half of brokers think only smarter lenders will develop products based on affordability.
However, there is the technology available now that can empower smarter product development.
Our MBT Sandbox, for example, provides lenders with a ground-breaking data-driven approach to product development, enabling them to create and refine products with specific customer segments in mind.
The environment may be more challenging, but technology can help to overcome this challenge and empower brokers to deliver more positive customer outcomes.
Tanya Toumadj, CEO at Mortgage Broker Tools
