When mortgage affordability is king, fixating on income multiples is not essential – Pepper

The trade body’s figures showed that the average income multiple for first-time buyers in December was 3.66, and 3.45 for home movers.

But in a world where affordability is king, should we still be fixating about income multiples?

In some circumstances, income multiples are still relevant for your clients, as some lenders will cap lending at certain income multiples even once their circumstances have been assessed as part of an affordability calculation.

This does not have to be the case and there are lenders that will establish the maximum loan size they are able to offer based entirely on a full assessment of a borrower’s income and expenditure.

This is possible through the individual underwriting of every application, often by specialist lenders and, in the right circumstances, it could mean that your clients are able to borrow a larger loan that truly reflects their affordability position.

Complex income or multiple sources

For example, an individual approach to affordability assessment without capped income multiples could be beneficial for clients with complex income structures, such as contractors, company directors, people earning significant bonus or overtime.

This could also help applicants with multiple types of income, including investments and different sources of employment.

And it could also be the most appropriate approach for clients who have few monthly commitments and lower than average outgoings.

So, don’t let income multiples hold back your clients.

If you are working with clients who are unable to achieve the loan size they require because they are unable to borrow a larger multiple of their income, it could be that they can demonstrate affordability with a lender that takes a more focussed approach to calculating their individual income and expenditure.