Mortgage Broker Tools (MBT) has launched a mortgage Affordability Index, to provide brokers and lenders with a snapshot of lender affordability calculations and the spread of loan sizes available for a range of different circumstances.
The first MBT Affordability Index, using data analysis by MBT Affordability based on more than 65,000 client searches, shows that the average loan requested by brokers across the whole of market in August was £210,000, to which the average minimum loan amount offered was £127,965 and the average maximum was £284,880.
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.
MT said that 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 it’s harder for first-time buyers 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, which is down from 1.22 in April. However, the minimum average loan offered by lenders to first-time buyers 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.
According to the MBT Affordability Index, Home Movers are the only group of clients who are requesting larger loan amounts since lockdown, compared to the beginning of the year, reflecting the strong bounce-back in the property market since the Stamp Duty Land Tax holiday was announced in July. The average loan amount requested in July was 5% higher than the average amount requested in January.
Tanya Toumadj (pictured), 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.”