Virgin Money has today made improvements to its affordability calculations, in a bid to offer customers the ability to borrow more if needed.
The lender relaxed its rules, giving more customers access to higher loan-to-income (LTI) multiples.
Contractors are no longer limited to 4.49-times their income, while higher earners and customers remortgaging with no additional borrowing have increased access to Virgin’s 5.5-times multiple.
Craig Calder, head of secured lending at Virgin Money, said: “We know that for customers getting the loan amount they need from a lender can sometimes be challenging.
“Virgin Money is committed to supporting people in meeting their financial goals, whether that’s getting onto the housing ladder or switching to deal that gives them value for money.
“That’s why we’ve made changes to our affordability assessment to better reflect customers’ individual situations, providing most customers with improved lending amounts.
“We’ve also reviewed our loan-to-income criteria to make it more simple and straightforward.”
Reaction:
Justin Moy, managing director at EHF Mortgages:
“Perhaps the biggest headache for many, with their borrowing power diminishing over the past 12-18 months as both mortgage rates and the cost of living have taken hold.
“This move by Virgin Money is a step in the right direction, and where the mortgage should be affordable this should reflect a common-sense approach.
“With Nationwide’s improvement for self-employed borrowers also announced this week, it’s evident lenders are looking at more than just rates to improve their application numbers.”
Lewis Shaw, owner and mortgage expert at Shaw Financial Services:
“Enhanced income multiples are all good and well however consumers should be cautious borrowing at these levels. Caveat emptor has never been more important for buyers.”
Craig Fish, director at Lodestone Mortgages & Protection:
“This is a step in the right direction, and Virgin can be applauded for its attempts to help more borrowers.
“As always though, any mortgage requires personalised advice.
“It should never be just about borrowing the maximum available, and more about balancing the affordability of your mortgage with the lifestyle you wish to live alongside home ownership.”
Bob Singh, founder at Chess Mortgages:
“This is a clear indication of a sweep-up exercise by lenders to reel in as many borrowers as possible.
“The timing is Christmas come early for many people who just want to get that leg up on the ladder.
“With rates set to fall, buyers that have been waiting on the sidelines will no doubt be looking at the first opportunity to jump in. As long as the rates keep dropping, affordability will get better.”
Gary Boakes, director at Verve Financial:
“With house prices not falling as much as expected, rising interest rates have put more pressure on lenders to be more creative with their criteria and affordability.
“Virgin are following a number of lenders going down this route to entice buyers back to the market.
“With rates being higher at the moment, the good news is that buyers don’t seem to want to buy beyond their means, a decision that maybe would have been different a few years ago when rates were low.
“All in all, I don’t think that the increased affordability is going to have too many long term issues.”
Graham Cox, founder at Self Employed Mortgage Hub:
“It’s great to see lenders being more flexible in their lending policy.
“However, it’s disappointing the increased loan-to-income multiple of up to 5.5 x income doesn’t apply to the self-employed, other than to contractors.
“Company directors, LLP partners and sole traders are left languishing at the usual 4.49 income multiple.”
Steven Hargreaves, mortgage and protection adviser at The Mortgage Co:
“Another sign that lenders need to secure their share of the mortgage market at the moment.
“Whether it’s lenders reducing their margins on interest rates and creating a Rate War, or easing criteria, they all need to be lending money, the applications today are the completions in Q1 2024.
“If further proof were needed increasing income multipliers and easing criteria equates to lenders being short on applications, Virgin increasing income multipliers, Both Halifax and Nationwide easing criteria on self-employed applicants this week.
“Hopefully, we do not see clients over-committing and buying/borrowing beyond their means.”
Charles Breen, founder & director at Montgomery Financial:
“This could be a massive boost to first-time buyer, this will give them that much-needed boost to get that dream home that they may have been struggling to afford before.
“News like this coupled with decreasing rates makes buying a first home or even moving home much more appealing to a lot and could be exactly the type of move we need, if followed by other lenders this could be the beginning of a very busy Christmas period and new year.”
