Following Saturday’s cut in the main rate of employee National Insurance contributions from 12% to 10%, Santander has announced it is updating its affordability calculator to reflect this.
In light of this affordability change, Newspage sought the views of a number of brokers, asking how this could impact the market going forward.
One broker said that while “affordability tweaks are not as rock and roll as rate cuts, their impact on the mortgage market should not be underestimated”, while another said it shows that lenders “are willing to fight for business beyond simply interest rates.”
Reaction:
Riz Malik, founder & director at R3 Mortgages:
“Improvements in affordability calculations due to lower National Insurance deductions are a positive step and a further boost for borrowers alongside the ongoing raft of rate cuts.
“Affordability tweaks are not as rock and roll as rate cuts but their impact on the mortgage market should not be underestimated.
“If there are further tax cuts in the upcoming Budget, this could stimulate the market even more.”
Scott Taylor-Barr, principal adviser at Barnsdale Financial Management:
“This is a great example of how competitive the UK mortgage market is.
“A relatively small change in the tax burden on households is immediately used to drive what will be a relatively modest boost to people’s affordability because it gives lenders who can do it quickest a competitive advantage over those that need a little more time to integrate these changes into their affordability models.
“It won’t translate into a huge shift in people’s borrowing capacity, but it will certainly help and shows that banks and building societies are keen to lend and are willing to fight for business beyond simply interest rates.”
Ben Tadd, director at Lucra Mortgages:
“Another small win for mortgage borrowers with a boost to affordability.
“The small increase in net pay to people’s pay packets will mean that, across several lenders, there will now be scope to borrow a little bit more money than people could do previously.
“Any additional tax cuts in the Budget will only help with affordability and help increase consumer confidence.”
James Bull, mortgage broker at JB Mortgages:
“Most lenders work out what people can borrow on an affordability basis given their circumstances. Tax reductions will mean people have more money in their pocket, helping them to afford more on their mortgage.
“Although one lender alone updating affordability is unlikely to make a huge difference, on a marginal gains basis if lots of lenders make small changes, added together this could make a big difference in the market.”
Imran Hussain, director at Harmony Financial Services:
“Rates are dropping but affordability remains an issue so these changes from Santander are another step in the right direction, especially for first-time buyers who continue to face challenges despite the fact house prices are slightly more palatable.
“All these things add up for borrowers.”
Rohit Kohli, director at The Mortgage Stop:
“This move from Santander following the National Insurance reduction will definitely help some borrowers who are on the margins of affordability and we’ve already had confirmation from Santander that they have updated their tools to reflect the National Insurance change.”
Ross Lacey, director & chartered financial planner at Fairview Financial Management:
“This will have a positive impact on affordability calculations and could trigger more competition between lenders who are desperate to get money into the market after a quiet 2023.”
Graham Cox, founder at Self Employed Mortgage Hub:
“Lower taxes and national insurance should help with mortgage affordability.
“Banks and building societies are very keen to lend in this slow market, but they also must factor in fiscal measures and borrower outgoings when considering applications.
“But with rates falling sharply, base rate cuts expected before long, and food and energy prices rising less quickly, there’s every reason to be optimistic.”
Charles Breen, founder at Montgomery Financial:
“While any help is appreciated in this cost-of-living crisis and housing affordability crisis, affordability cuts are like taking a knife to a gunfight, way too little to make a serious impact.
“Yes, it makes a slight difference but not enough to people’s affordability to make an impactful difference.
“With most things at the moment, it is always too late, or too little, or both. And that is the road to disaster we currently are on when it comes to housing.”
Austyn Johnson, founder at Mortgages For Actors:
“Improved affordability will always help the market.
“The past year or so has left many people, especially first-time buyers, with real disappointment on their affordability.
“If affordability is raised, it will help them get that first foot on the ladder.
“Also, it will mean that fewer mortgage applications fail due to affordability as long as people aren’t scrambling for every last pound. The more tax cuts, the better.”
