Mortgage affordability is the ability of a borrower to comfortably meet their mortgage repayments based on their current financial circumstances. In the UK, lenders are required to do this by the central regulator, the Financial Conduct Authority (the FCA). Lenders work this out by looking at an individual’s income, existing debt, credit history, and other factors. The goal is to ensure that borrowers are able to repay their mortgage comfortably, and reduce the risk of defaults for lenders. This ensures a stable and sustainable housing market for all.

To calculate a mortgage affordability score, a lender will look at an individual’s net income (their income minus expenses). They will also look at any committed expenditure they have like debt repayments, car finance, BNPL payments and even student loan repayments. After this, the lender will decide what multiple of that individuals’ income they are prepared to lend to them for a home. Typically this is 4.5 times a person’s salary. So if an individual earns £50,000 per year, they would be able to take out a mortgage worth £225,000. Two individuals – say, a couple – being offered the same multiple, would be able to jointly take out a mortgage worth £450,000. Lenders may also consider the size of the deposit being put down by the buyer, a bigger deposit (e.g. 20%) means a lower Loan To Value ratio (i.e. 80%), which may result in a higher earnings multiple.

It absolutely does. The rising cost of living is a result of the prices of goods and services rising more quickly than income does in a short space of time. This increased cost of living reduces an individual’s disposable income – how much they have to spend – making borrowing more difficult. People experiencing particular financial strain may be more likely to resort to debt, affecting their debt utilisation and credit history, making their ability to take out a mortgage more difficult. To top this all off, the UK’s central bank, The Bank of England responds to inflationary pressures by raising interest rates, which makes debt more expensive, increasing mortgage rates, making them even more expensive still.

For prospective homebuyers in the UK, getting yourself into the best possible position before applying for a mortgage is paramount. Here are some points to consider: