Changes to our affordability calculation

The Bank of England's Financial Policy Committee has announced that lenders should apply a stressed rate which assumes a growth in the base rate of 3%. Accompanying this, caps have been announced on lending at income multiples greater than 4.5 x gross income.

As a result of this announcement, we'll be making some changes to our affordability calculation, which means you may receive a different affordability result than you've come to expect.

From tomorrow Tuesday 22 July, our calculators will be updated to reflect the following changes:

Stressed rate

  • The stressed rate we use in our affordability calculation will be increased to 6.99%.

Income multiple cap

  • We'll simplify the way we apply our income multiple cap by aligning it across all employment types.
  • The income multiple cap will be based on gross income.
  • So for all employment types, the maximum income multiple cap used in our affordability calculation will be 4.75 x gross income.

Securing a Decision in Principle (DIP)

To secure a DIP using the current affordability calculation, it must be submitted through NFI Online or NFI MTE by 5.00pm today (Monday 21 July). Paper DIPs must be faxed to 01604 852 879 before 5.00pm. Paper DIPs and applications received after this time will be assessed using the new affordability calculation.

Pipeline applications

  • Until Wednesday 20 August 2014 - cases where the initial DIP was keyed before 5.00pm Monday 21 July, will be assessed under current affordability rules even when a reprocess takes place.
  • From Thursday 21 August 2014 - any case that requires a reprocess after this date will be assessed under the new affordability calculation.

If you have any questions regarding these changes, please contact your local BDM or Regional Sales Support team.