Affordability & Length of Fix

sgx.saint

Hello.

I read a Telegraph article earlier today that said some lenders will not undertake affordability checks on applicants who are looking to fix for five years or more due to the fact they are not required to under the new mortgage rules.

However sub five year fixed or variable mortgages are stress tested.

Is the article correct?

I haven't been asked for income/expenditure by my proposed lender and the broker doesn't seem to think they will require anything before the underwriter makes a decision.

If the above is true then this might explain why.

ACG

Some lenders base the affordability on the rate your fixing into if its 5 years plus rather than the standard rate they stress test on - which vaires from lender to lender. That may be better than the standard rate.

I dont think all lenders do it.

sgx.saint

ACG wrote: »

Some lenders base the affordability on the rate your fixing into if its 5 years plus rather than the standard rate they stress test on - which vaires from lender to lender. That may be better than the standard rate.

I dont think all lenders do it.

Thanks ACG.

Does that mean the lender would still typically want to see income and expenditure information?

All I've provided so far via the broker is payslips, P60 and bank statements.

Virgin have only asked for payslips and P60 to date and as far as I'm aware the application will be with the underwriter early next week.

kingstreet

Presumably, your broker hasn't provided you with a copy of the application form then?

sgx.saint

kingstreet wrote: »

Presumably, your broker hasn't provided you with a copy of the application form then?

No, full application has been submitted and valuation complete.

amnblog

I have not seen the Telegraph article but either you have misread it or it is wrong.

Lenders have to run affordability checks on ALL residential applications.

They also run a 'stress test' calculating affordability should base rates rise.

Where a client selects a fixed rate of 5 years or more they do not have to run the stress test.

sgx.saint

amnblog wrote: »

I have not seen the Telegraph article but either you have misread it or it is wrong.

Lenders have to run affordability checks on ALL residential applications.

They also run a 'stress test' calculating affordability should base rates rise.

Where a client selects a fixed rate of 5 years or more they do not have to run the stress test.

Thanks.

I see, so affordability and the stress test are two different things.

In my case I assume I wont be stressed tested.

How does a lender assess affordability? Revisiting my specific circumstances whereby the lender has not asked me about any income and expenditures.

amnblog

The broker will have given the required information to Virgin Money.

If the affordability is tight they issue a budget planner for the borrower to complete. If it is not tight on affordability, they do not request it.

sgx.saint

amnblog wrote: »

The broker will have given the required information to Virgin Money.

If the affordability is tight they issue a budget planner for the borrower to complete. If it is not tight on affordability, they do not request it.

Thanks again.

So how would they have worked out affordability from payslips alone?

Using ONS averages or similar?

I'm assuming affordability wasn't an issue and LTV is 60%.

amnblog

I would not worry about it, I am sure your broker has it under control.

sgx.saint

amnblog wrote: »

I would not worry about it, I am sure your broker has it under control.

I would hope so, he comes well recommended and has been very helpful so far.

I'm not worried, just curious, so I thought whilst it is the weekend, with my broker not working, that I'd ask some of the more knowledgeable folk on here.

So I was hoping you could elaborate on "If the affordability is tight they issue a budget planner for the borrower to complete. If it is not tight on affordability, they do not request it."

How would a lender, any lender, assess this, without the later, the budget planner?