Mortgage Broker Tools launched its Affordability Index, based on more than 65,000 searches, to provide brokers and lenders with an up-to-date and accurate snapshot of lender affordability calculations and the spread of loan sizes available for a range of different circumstances.
The Index, which tracks affordability data back to January of this year, shows how lenders reined in their affordability calculations in April during the lockdown but have gradually been prepared to lend more to customers since May.
In August, the Index for the average maximum loan size offered by lenders was 1.33, which is an increase of more than 5% on April when it was 1.26. The Index for the average minimum loan size offered by lenders in August was 0.60 – an increase of nearly 20% on April when it was 0.50.
So, while the market has opened up slightly for larger loan amounts, there has been a more significant increase in options for smaller loan sizes.
The most restrictive affordability calculations remain for first time buyers - and the Index indicates that it is harder for FTBs to access larger loans now than it was in April. In August the Index for the average maximum loan size offered by lenders was 1.20, down from 1.22 in April. However, the minimum average loan offered by lenders to FTBs has risen, with the Index increasing by nearly 56% from 0.34 in April to 0.53 in August, and the Index shows that there is still opportunity for buyers to borrow more than their requested loan amounts with the right lender.
The affordability landscape has barely changed throughout the year for remortgage borrowers. According to the MBT Affordability Index, the maximum loan amount offered by lenders peaked in March with Index hitting 1.55, but both the maximum and minimum loan amounts offered have otherwise remained consistent throughout the year.
Tanya Toumadj, CEO at Mortgage Broker Tools, said:
“Affordability is such an important part of placing any case and can often change the choice of lender that a broker recommends. So, we wanted to provide brokers with an accurate, data-driven snapshot of the latest affordability landscape to help them understand the likely borrowing potential for their clients from the outset.
“The MBT Affordability Index is a quick and easy way for brokers to see whether lenders are increasing the loan amounts they are prepared to offer, or restricting loan sizes. It also gives brokers an idea of the spread of loan sizes available to borrowers. This is often significant and represents a real opportunity for brokers to add value by selecting the right lender able to offer a loan amount that meets their client’s objectives. This takes a lot of research, of course, and is why a platform like MBT Affordability is such an important for brokers to have in their armoury.”
