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New factors influence UK mortgage decisions

Date: Mon, 31 Oct 2005

More UK mortgage providers are considering varying factors when making a lending decision as they move away from traditional income-based home loans.

Moneyfacts.co.uk reports that many lenders are now looking at how much a customer can afford to repay rather than using the more traditional factor of income multiples.

There is a growing trend for UK mortgage companies to use affordability criteria, which assesses how much disposable income an applicant has, rather than simply doing a three and a half times salary assessment. Lenders are also more likely to allow customers to apply for higher levels of borrowing.

"In many ways we’ve started to come full circle as more providers move to evaluating how much a borrower can afford to repay rather than using income multiples. On the face of it both calculations seem quite straightforward," said Rachel McKay, mortgage analyst from Moneyfacts.co.uk.

"In both cases you may have the opportunity to request an underwriter to have a further look at the calculation and potentially allow a ‘stretch’. This means taking certain things into account, which may influence the underwriter to allow a higher level of borrowing," she added.


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