Harmonise affordability system to help brokers and clients, says AMI

8 March 2010 | By Natalie Thomas

The Association of Mortgage Intermediaries has called for lenders to level the playing field when it comes to assessing borrowers’ affordability.
Last week Nationwide for Intermediaries became the latest lender to change the way it assesses affordability.

It has withdrawn its income multiplier and says it will instead take a more personalised approach to assessment. The lender has introduced a system of calculation that varies according to clients’ individual circumstances.

Robert Sinclair, director at AMI, says it would be good if lenders could agree on a unified system for checking borrowers’ affordability.
He says: “This is the latest in a series of changes to criteria, assessment procedures and process requirements.

“I hope things will stabilise soon so brokers have a common way of dealing with lenders and know what they have to do to help their clients get the deals they require.”

Nationwide’s new system takes into account net disposable income, applies further deductions for household costs and uses a calculation that takes account of factors such as LTV.

A spokeswoman for Nationwide says the lender never relied solely on its income multiplier.

She says: “We have always been cautious in how we assess what an individual can afford to repay and are continuing to be prudent. Our calculation now takes an even more personalised approach to assessing what we will lend.”

The lender also announced last week that it will no longer allow payment holidays or borrow-back features.

Borrowers will still be able to overpay and underpay as well as extend their mortgage terms to reduce payments if their repayment type is capital and interest.

They will also be able to convert to interest-only so long as an acceptable repayment vehicle is in place.