Barclays have announced improvements to their affordability model, with higher income clients now able to borrow up to 5.5x. Brokers welcomed the news, saying it reflects the battle for market share.
According to Ranald Mitchell, director at Norwich-based Charwin Private Clients: “This is just the beginning of what will be a seismic shift in lending policies that are about to be rolled out by lenders, who’ve written off 2023 as a dud year and are struggling to lend sufficient amounts in the current climate.”
Justin Moy, managing director at Chelmsford-based EHF Mortgages, agreed that the changes reflect the bun fight taking place between lenders: “These improvements in the affordability model will be of great benefit to borrowers and, when coupled with improving rates, are another vote of confidence in the mortgage market. For those with good incomes and low commitments in particular, this will give them a huge advantage, and will encourage other lenders to follow suit. With the bun fight for mortgage business at the moment, lenders are definitely looking beyond rates to add value.”
Richard Campo, founder at Rose Capital Partners, said the changes reflect the confidence that is returning to the market: “This move from Barclays is a great sign that confidence is returning to the market, and that we may well be over the peak of this current interest rate cycle. Even if the base rate, and therefore mortgage interest rates, hold around this current level, it will give other lenders the confidence to loosen the purse strings. While it looked like interest rates were constantly rising off the back of the mini-Budget and inflation, I can understand why lenders were more cautious on their affordability models. Now we seem to be over the hump, and this news will be a great boost to anyone looking to move as it will help increase their budgets and make a larger purchase more viable.”
Steven Hargreaves, mortgage and protection adviser at The Mortgage Co, also said the changes reflected the scrap for market share and could be good news for the property market, but had some concerns: “We are seeing most lenders improving the criteria and accessibility of borrowing money, which is good to see. This is at the same time as having a fixed rate war, which bodes well for the housing market. However, at present, these improvements do not seem to be filtering through to applications. Lenders know that with lending down, many will miss their borrowing targets so they are keen to improve criteria as well as cut their margins.”
Gary Bush, financial adviser at the Potters Bar-based MortgageShop.com, agreed: “This is a clear sign that UK lenders are very worried about maintaining their mortgage market share as 2023 draws to an end.”
For Peter Stamford, director at Alston-based Moor Mortgages, this move will win not just borrowers’ hearts but their wallets, too: “Fantastic news from Barclays, who are giving a leg-up to medium and high earners feeling the pinch. By tweaking income-to-loan ratios, they’re making homeownership more attainable in these tough financial times. A smart move that’ll win hearts and wallets.”
But Riz Malik, founder at R3 Mortgages, sounded a note of caution: “Barclays should be commended for trying to assist more borrowers. However, increasing borrowing levels is a ‘sticky plaster’ solution. To kick-start the UK property market we need a big injection of confidence and an incentive. That can only come from Downing Street.”
