In response to shifting market dynamics characterised by dwindling demand and waning interest in high-interest rate mortgages, Virgin Money and Clydesdale Bank have recently announced significant improvements to their mortgage affordability criteria. These changes come as both lenders seek to adapt to evolving borrower preferences and a quieter yet more volatile mortgage market in the UK.
Advanced Mortgage Affordability
In two separate emails to brokers today, Virgin Money and Clydesdale Bank have announced that they will be implementing a series of improvements to their affordability calculations, with the primary goal being to offering greater lending flexibility to potential homebuyers who might have previously fallen short of their desired mortgage affordability. These enhancements show a decisive step towards accommodating the changing needs and financial circumstances of their customer base. In essence, these changes mean that, for most customers, these lenders can now offer more generous mortgage terms than just a week ago. This will undoubtedly be welcome news to prospective borrowers who have been navigating the challenges posed by a more subdued housing market in recent times.
Loan-to-Income Ratios And Mortgage Affordability
One of the key alterations made by Virgin Money and Clydesdale Bank is the relaxation of their rules and the removal of certain restrictions. This, in turn, has opened up access to higher loan-to-income (LTI) multiples for a broader range of borrowers. In particular, higher earners and customers who are remortgaging without additional borrowing now have greater access to a maximum LTI multiple of 5.5x.
Here’s a summary of the new LTI multiples:
For Purchase or Remortgage with Additional Borrowing:
– Income under £50,000 – 4.49x
– Income £50,000 to £74,999 – 5x
– Income of £75,000 or more – 5.5x
It’s important to note that a maximum LTI of 4.49x applies to loans over 85% loan-to-value (LTV) or if any applicant is self-employed, irrespective of their income level. Virgin Money and Clydesdale Bank have refined their criteria to calculate these income levels, incorporating basic pay, 60% of allowable variable income, and 100% of pension, rental, and allowable benefit income.
For Remortgage with No Additional Borrowing:
– Up to 85% LTV – 5.5x
– Over 85% LTV – 4.49x
Remarkably, for a remortgage with no additional borrowing, income levels and self-employment status no longer impact LTI limits, creating a more streamlined and accessible process for borrowers in this category. Furthermore, these lenders continue to offer a maximum LTI multiple of 5.5x for eligible Newly Qualified Professional applicants who choose an NQP product.
Market Shifts Drive Changes
The recent adjustments to mortgage affordability criteria by Virgin Money and Clydesdale Bank are typical of the broader shifts within the UK mortgage market. High-interest rates and a general lack of interest in traditional mortgage products and purchasing have resulted in a quieter market, prompting lenders to adapt to these new dynamics. With the changing landscape, Virgin Money and Clydesdale Bank are likely not the only lenders re-evaluating their mortgage offerings. As market changes continue to shape consumer demand, it is foreseeable that other mainstream lenders may follow suit and make similar changes to their affordability criteria.
Speak To A Mortgage Professional
The mortgage market in the UK is undergoing significant transformation, influenced by shifting consumer preferences and evolving economic conditions. Virgin Money and Clydesdale Bank’s recent improvements to their mortgage affordability criteria reflect their commitment to staying responsive to market dynamics and delivering tailored solutions to borrowers.
While these changes are aimed at offering more flexibility and better options for potential homebuyers, they also underscore the importance of staying vigilant and adaptable in an ever-changing financial landscape. As the market continues to evolve, it is likely that other lenders will take cues from Virgin Money and Clydesdale Bank and adjust their affordability criteria to remain competitive and appealing to borrowers in a quieter mortgage market. To keep on top of these lender changes and to get the best guidance when navigating the mortgage market, call or email our team of brokers today. We are here to help.