The lender will factor increased national insurance, household expenditure and dividend income tax rates, as well as changes to Scottish tax bands into its affordability.
And five-year fixed, like-for-like remortgage and retained property residential stress rates are to be raised.
The changes will take effect on Wednesday 6 April to coincide with the new 2022/2023 tax year.
Brokers have been told the lender’s affordability calculator will be updated to reflect these changes.
The lender said all usual pipeline rules will apply with all full mortgage applications submitted by close of business on Tuesday 5 April unaffected by these changes.
At the same time, the lender has clarified a number of residential criteria including the evidence needed for foreign nationals and what to do when an applicant has just one name.
Lender changes to affordability is expected as the cost of living changes, according to Imran Hussain, director at Harmony Financial Services.
He said: “With living costs spiralling out of control and National Insurance and dividend income tax rates rising, it should not come as a surprise that lenders will have to adjust how much they will allow people to borrow.
“They have a responsibility to ensure all borrowing is affordable. Some have done so already, while others are doing so.
“If anyone is in a position that they are unable to borrow when they come to remortgage, depending on the lender there may be options to switch products.
“However, the value of advice at this point will be more important than ever before.”
Rate increases
The bank has also hiked up some rates by as much as 0.25 per cent.
Two-year fixed remortgage and purchase products with a £999 fee have seen rate rises of 0.10 per cent at 60, 75 and 85 per cent loan to value (LTV), with respective rates of 2.14 per cent, 2.19 per cent and 2.24 per cent. A two-year fixed purchase mortgage at 90 per cent LTV with a £999 fee has also increased by the same to 2.29 per cent.
Five-year fixes up to 85 per cent LTV have gone up by as much as 0.20 per cent.
Santander has also pulled two and five-year fixed fee-free products between 75 and 90 per cent LTV.
Rates for new-build mortgages have risen by up to 0.20 per cent at 75 per cent LTV.
Buy-to-let mortgage rates at 60 and 75 per cent LTV with a £1,499 fee have increased by up to 0.25 per cent. Changes apply from 5 April.
