The Ipswich said that these “mortgage misfits” will potentially be let down by a system that in many cases relies on automated assessments based on calculations of the ‘average’ borrower.
Types of ‘misfit’ customers include: those earning less than £25,000 per year; small business owners; the self-employed; and those who have different income types such as pensions, equity in a business or property, rental income and investments.
Paul Winter, Chief Executive of Ipswich Building Society, said: “It is entirely appropriate that the FCA wishes to introduce regulation to ensure the lending excesses of pre-2008 are not repeated and that irresponsible lending is firmly tackled.
“However, I am concerned that people on average incomes may now find it harder to obtain a mortgage and I believe this may prove to be an unintended consequence of the methods used to implement affordability requirements.
“Ipswich Building Society has always manually underwritten and carefully reviewed the financial situation of our mortgage applicants.
“This is confirmed by our lower than industry average arrears levels. Previously acceptable borrowers may now struggle to pass the new affordability test if relying completely on computer data to prove expenditure.
“Whilst we cannot change the new affordability model, we will offer borrowers the option to provide their own expenditure evidence rather than relying on a computer model. We hope this will help more people to obtain a home of their own.”
Current data shows that a family of two adults and two children wishing to purchase a property for £125,000, with a household income of £30,000 and with a 10% deposit, would not meet the requirements of affordability using expenditure data from a computer model.
Analysis comparing the computer model expenditure data to the evidence of expenditure of ‘real’ applicants has shown that using the latter would actually pass the affordability test.
Winter added: “The government needs to address housing supply issues rather than potentially limiting those on average incomes from obtaining a mortgage.
“Many aspirational home owners are facing a double lock: unavailable lending and a lack of homes to choose from."