Accord Mortgages has announced it will now be able to lend on average 15% or £37,000 more as a result of changes to how it assesses borrower affordability.
The lender is responding to updated regulatory guidance which enables lenders to set lower ‘stress rates’ – sample rates used to underwrite mortgage applications, to check that borrowers will still be able to afford their payments if interest rates increase in the future.
The new affordability assessment model will apply to all new lending.
The move mirrors recent announcements from several high street lenders who have announced changes to the stress rates used in their mortgage affordability calculations this month.
Last week, HSBC announced changes to mortgage affordability assessments, with the average increase in offers for first-time buyers at £39,000.
The announcement followed Halifax, BM Solutions, Bank of Scotland and Lloyds Bank who all announced enhancements to mortgage affordability assessments the previous week.
The stress rates used by the four lenders in their standard affordability calculation, and the enhanced affordability offered with five-year+ products, will be lowered. As a result, typical customers may see increases around 13% in the maximum loan available, meaning a typical household could potentially borrow £38,000 more.
Other recent steps Accord has taken to help borrowers overcome affordability challenges have included the launch of its first-time buyer cashback product range offering up to £6,250 cashback for them to use toward the increased costs associated with buying, including a higher stamp duty purchase tax. It has also extended the eligibility criteria for its £5k Deposit Mortgage to people buying flats, while its Boost LTI range gives borrowers access to more times their income, subject to criteria.
Jeremy Duncombe (pictured), managing director of Accord Mortgages, said: “Accord already offers market-leading innovation and flexibility to help borrowers overcome today’s affordability challenges, but we’re always looking for new ways of applying the common-sense approach we’re known for.
“We really welcome the regulator’s latest guidance on aspects like the stress interest rates we have to apply to our mortgage decisions.
“We’ve been able to review our already-competitive affordability model in light of this, combined with changes in market and economic conditions, which means we can help even more people achieve their homeownership goals.”
