Leeds calls time on the use of income multiples

Leeds Building Society is no longer using income multiples to assess borrowers’ affordability.

From today, Leeds will only accept applications using its new affordability calculator. It will take into account income, other financial commitments and average house- hold expenditure figures, provided by the Office for National Statistics, to reach a decision on the maximum loan amount.

Decisions in principle based on income multiples offered up to and including April 13 will be accepted as long as the full application is submitted before close of business on April 20.

Buy-to-let applications are not affected by the change and will continue to be assessed on rental income.

As part of its final Mortgage Market Review paper, published in December, the Financial Services Authority included a proposal which means lenders must ensure they take into account basic living costs and other loan commitments when deciding whether to lend.

But Leeds says its decision was not influenced by the proposals.

Jonathan Clark, mortgage partner at Chadney Bulgin, says: “Affordability calculators are a more sophisticated way of working out whether a customer can afford their loan. And with the MMR stating lenders should assess affordability when lending, it is inevitable lenders will start to change the way they do things.”

Stuart Duncan, partner at The Personal Mortgage Service, says: “I am against the ’one size fits all’ approach and there are circumstances where income multiples are more helpful, for example, when one member of a couple cannot go on the mortgage for whatever reason.”