In that sense, advisers who are perhaps a little longer in the tooth – and I include myself amongst this number – are having to ditch their old assumptions about affordability in the context of X times salary for clients. This simply doesn’t work anymore.
Who does this impact the most? Well, it’s an obvious point to make, but I would suggest that first-time buyers are being hit the hardest by these changes, or younger borrowers in general, especially because a lot of the ONS data on which the affordability decision is predicated, doesn’t really reflect their reality.
For example, I would suggest they are much more likely to work from home, they are more likely to have lower commuting costs – ONS assumes you commute to work and includes travel costs that most are not paying; they are more likely to be buying new-build homes, they are more likely to be paying lower maintenance costs, etc.
The ONS doesn’t really factor that in and that is having an impact for these borrowers in terms of how much they can borrow.
However, I would say there’s a part of me that thinks we shouldn’t be crying over spilt milk here.
The previous set of ONS data undoubtedly favoured advisers and their clients in terms of allowing them access to larger loans and not being truly in tune with a lot of borrower experience. We benefited from it then, so should we be upset that it doesn’t now?
What I would say is that the ONS data is still great news for advisers in that potential borrowers will need advice more than ever before in terms of wanting to know what they can afford to buy.
As mentioned, it’s not simply a case of multiplying your salary by a number and getting your maximum loan amount. The likelihood is that consumers will need to come to an adviser in order to get a clear understanding of what they can afford, and of course this will be different for each lender.