The enhanced affordability calculation is a direct result of feedback from intermediaries.
As part of the change to how affordability is assessed, the Society has increased the amount that new applicants can borrow.
Nationwide’s affordability calculation takes into account a range of factors when assessing a borrower’s income such as the customer’s monthly commitments and a stress test which uses a higher interest rate to ensure that the customer can afford the monthly mortgage payments.
Tim Hughes, head of intermediary markets at Nationwide, said: “Our intermediaries have been telling us for a while that, although they rate our competitive products, it’s time we updated our affordability calculation to take into account those customers who can afford to borrow more.
“We are a responsible and prudent lender but we haven’t changed our current affordability calculation since February 1998 and it is time we fell in line with the trends that have had such an impact on the mortgage market, such as an increase in house prices and several years of low interest rates.”
Tim Hughes says that the Society’s decision to change the approach to affordability calculations should be another incentive for intermediaries to choose Nationwide over lenders that offer simple income multiples.
“We moved away from using simple income multiples to assess a borrower’s ability to pay more than 10 years ago. An affordability approach to lending ensures consumers are given mortgages that accurately reflect their disposable income and outgoings. It will enable them to borrow an amount that is more reflective of current property prices and will allow more intermediaries to consider Nationwide’s great products when looking for a suitable mortgage for their client.”
