Nationwide to withdraw income multiplier
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Nationwide for Intermediaries has announced that from tomorrow it will no longer use its income multiplier tool as part of its assessment of a borrower’s affordability.
Instead, it will be taking a more personalised approach and introducing a new calculation which will vary from case to case depending on the client’s individual circumstances.
The lender says it never assessed an applicant based solely on its income multiplier.
The new system will take into account the net disposable income, apply further deductions for household costs, and use a calculation that will also take account of factors such as LTV.
It will no longer allow payment holidays and borrow back features on any new Nationwide products reserved from March 4.
Borrowers will still be able to overpay and subsequently underpay, as well as extend the mortgage term to reduce payments if their repayment type is capital and interest.
They will also be able to convert to interest only, as long as a acceptable repayment vehicle is in place.
Nationwide for Intermediaries is also renaming its reservation fee to product fee, which it says is designed to help distinguish the fees when using product sourcing systems.
A spokesman for Nationwide, says: “We have always been a cautious lender where we assess what an individual can afford to repay and we are continuing to be prudent. Our calculation now takes an even more personalised approach to assessing the amount we will lend.”
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Readers' comments (10)
Anonymous | 3 Mar 2010 10:52 am
Come on Nationwide... “We have always been a cautious lender where we assess what an individual can afford to repay and we are continuing to be prudent. Our calculation now takes an even more personalised approach to assessing the amount we will lend.”
Combine this with your "listening to what brokers say" and taking away the Free Legal Package for First Time Buyers...
Why not just say that you don't want any business at the moment?
As an aside, if you REALLY are listening to what the brokers are saying, PLEASE COULD YOU INCREASE YOUR SVR BY AT LEAST 5% AND ACCEPT NO PRODUCT TRANSFERS?!!
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Clive Watkins | 3 Mar 2010 10:55 am
I think Nationwide's approach to calculating affordability is very sensible. Applying old fashioned income multipliers is too inflexible but can be open to abuse. Prudent lending mixed in with some up to date realism is the 'key' to getting the UK mortgage market rebooted.
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Aveneue & Co Private Finance | 3 Mar 2010 10:56 am
Lenders are becoming increasingly sophisticated in the way they assess affordability now.
Brokers will now have to amend the way they search products on the back of these changes as sourcing systems may not accurately bring up suitable products.
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Mark Sutton | 3 Mar 2010 11:06 am
I have no problem with this as long as they provide a convenient way for us to calculate how much clients can borrow. Good examples of this are Abbey, A&L and Halifax. A bad example is Woolwich where you have to work through two calculations to acertain if they will lend enough - very time consuming. Perhaps they think we have plenty of time on our hands at the moment. The only problem with any of these afforability calculators is when the lenders also say the maximum amount they will lend is subject to credit score. As they seem to vary their credit score almost daily, we don't know if the clients are going to be low, medium or high score!
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Mortgage Advice Brokerage | 3 Mar 2010 11:31 am
A very interesting move from a lender that has always been cautious and has a good track record of low arrears - Was their old model really that wrong?
Just tried the new system and compared it to the old one. NEW £75,000 - OLD £109,908. Wow! Looks like they do want to reduce the lending levels they are currently doing.
They now wish to assess household occupants and calculate accordingly. If they are serious about affordability then they also need to include other income such as Child Benefit, CTC and WTC.
This is a legitimate income that can be evidenced and is used by many families whilst children are very young and the mother is taking time off work.
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Anonymous | 3 Mar 2010 11:49 am
This is obviously designed to increase direct sales and thus reduce broker income even further to, in some cases unsustainable levels during the worst state of our economy.Excellent news!
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Compliance Man | 3 Mar 2010 12:07 pm
The move is likely to have been made to fit the FSA requirements of being able to demonstrate that they have assessed affordability.
Using income multiples does not do this as it takes no account of an individuals other commitmnets.
Any intermediary not working on free disposable income needs to think again about how they would pass a compliance visit to demonstrate they have assessed affordability before making the recommendation.
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Andy Valvona | 4 Mar 2010 3:43 pm
Bearing in mind the FSA requested that lenders should not rely on Income Multiples alone some years ago, are we surprised that a major lender like Nationwide should make this announcement? The only surprise is that it has taken so long.
However, it does need to back this up with a clear route for intermediaries to be able to calculate it's approach to affordability, the actual process for which has not been mentioned in the announcement.
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Anonymous | 10 Mar 2010 10:03 am
I understand the reasoning behind this decision, however, I'm now in a position where the Nationwide had told me how much of a mortgage I could have. I found a property and made an offer which was subsequently accepted. On contacting the Nationwide they then told me that due to the change they could no longer offer what they previously said. So as to be able to purchase my new house I have to look elsewhere.
Ultimately, they have lost me as a mortgage customer. I hope this hasn't affected too many others in the same way.
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Anonymous | 12 Mar 2010 9:07 pm
To the Mortgage Advice Brokerage-do you not realise that CTC, WFTC, and Child Benefit are all benefits and therefore could be withdrawn at any time! Why would lenders/underwriters be looking to rely on benefits? Is that not part of the issues that lenders have at the moment?
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