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Wealthy borrowers impacted by stricter rules as lenders more cautious, brokers say

  • 01/08/2022
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Wealthy borrowers impacted by stricter rules as lenders more cautious, brokers say
Higher earners are now feeling the impact of tighter affordability calculations, brokers say.


The higher cost of living and rising interest rates have prompted lenders to rein in lending to buyers on lower incomes in recent months.

But now richer borrowers are also feeling the pinch, advisers have noticed.

Usually high earners are held back by loan to income multiples, but affordability has started to creep in to these applications, according to Chris Sykes, technical director at Private Finance.

He said: “It is not unusual for lower earners to be limited by affordability rather than the other measure which is income multiples, however this is the first time several of our brokers including myself are seeing higher earners being capped on affordability. Previously these borrowers would have been capped purely on income multiples.”

For example, in one case Sykes has seen a client earning an additional £30,000 compared to a year ago, yet their borrowing is the same.

Dean Esnard, specialises in high net worth earners at Magni Finance.

He has also noticed stricter borrowing from lenders.

“We are seeing tighter affordability checks being carried out.

“These are more noticeable when the applicant has other credit commitments, loans, credit cards, etc.”

Higher energy and food prices mean that dependents are having a bigger impact on affordability, Esnard added.

The higher cost of living reflected in data used by lenders from the Office for National Statistics (ONS) has impacted borrowers across the spectrum, according to Greg Cunnington, chief operating officer at LDN Finance.

However, wealthier borrowers are typically offered more flexibility on the rules so there will usually be a solution of some sort available.

He said: “Most high earners have more complex income structures, with bonus income and vested stock regularly part of the package if employed, or tend to retain a lot of income within their companies if self-employed. So in reality a lot of this business is done using manual underwriting access at lenders where a more flexible approach to affordability is made.

“If a client is really impacted private banks can waive the normal affordability requirements using high net worth exemptions, so we also regularly help high net worth clients with this route.”

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