The specialist lender has lifted the ceiling on the amount of variable income it will consider to be part of a calculation, to assess affordability for a mortgage.
The full amount of a monthly bonus or a commission plus all overtime payments can now be declared, whereas previously only half of those income streams were considered towards affordability.
Additionally, the lender will consider half of an annual or quarterly bonus or commission, and 50 per cent of rental income towards a customer’s affordability calculation.
A new option of a 40-year term to help customers spread their payments over a longer period is also being introduced, increasing disposable income.
Changes made to meet current financial challenges
Paul Adams (pictured), the sales director at Pepper Money, said: “At Pepper Money, we’re always looking to respond to market trends and help customers to overcome the challenges that stand in the way of them achieving their goals. Property prices may be softening, but the ongoing cost of living crisis and higher interest rates mean that mortgage affordability continues to be a challenge.”
He continued: “Whilst extending your customers’ term may not be appropriate for all customers, it’s important we provide a wide range of mortgage options to meet the changing needs of your customers. By increasing our consideration of variable income, we’re fairly rewarding customers for their additional work or performance related pay.”
“The introduction of 40-year terms not only helps to maximise affordability, but also reflects shifting working trends, as people work until later in their life. The state pension age will increase from 66 to 67 by 2028, is legislated to rise again in the mid 2040s to 68 and is expected to rise to 70 by 2050.
“People are working for longer, which means they can maintain mortgage payments over a longer term.”
