Everything brokers should know about our mortgage affordability checks

It’s no secret that mortgage approvals in 2023 are low across the UK, with the Bank of England reporting a decline in house purchases from 49,500 in July to 45,400 in August of the same year. Pair that with findings from our recent consumer study, which revealed that 9.7 million adults had missed payments in the last year, encompassing utility bills and credit card payments (both at 7%), as well as tax bills and loan repayments (both at 5%). It is now more critical than ever to make sure you have the right tools as a broker to successfully get your customers with complex credit onto the property ladder and fulfil their homeownership dreams.

In this post, we will be exploring our affordability checks as a specialist lender, designed to prequalify your customers and ensure they only access products they can truly afford. We will also cover how our lending policy is flexible and how we can work together to help specific complex cases move into a different credit tier based on your customer’s household expenditure.

Before we dive in, if you know exactly what you need, jump to one of the following sections:

• How we assess customer’s income & expenditure
• Broker portal features on affordability  
• Navigating complex incomes & driving better outcomes
• Your opportunity for sustainable growth  

How we assess customer’s income & expenditure 

Affordability is arguably the most important part of the underwriting process. Through our partnership with Experian, we’ve made reporting credit and assessing affordability even quicker and easier than before! When it comes to our credit check procedure, we utilise a verification process on our broker portal, which accurately analyses your customer’s income, their committed expenditure, essentials expenditure and basic expenditure. These improved affordability assessments give us an even better view of your customer’s overall household expenditure for a better understanding of your customer’s contribution and a more accurate measure of their ability to afford credit.

Broker portal features on affordability 

Our broker portal breaks down the expenditure underwriting assessment into three areas at the Decision-in-principle (DIP) stage. These are the monthly outgoings we measure:

• Committed expenditure: This report encompasses various expenditures such as loans or credit cards. Our underwriters assess this using data digitally pulled from Experian to get a clear understanding of what your clients are paying per month.  
• Household expenditure (Essential & Basic): This report encompasses various household expenses, including electricity, TV licenses, mobile phone bills, clothing, and other items. Our underwriters evaluate these expenses by cross-referencing Office for National Statistics (ONS) data and bank statements. For certain things, like gas and electric costs, we incorporate the entire ONS figure, while for others, such as mobile phone expenses, we factor in 75% of the amount. On our broker portal, you can manually enter these figures using the applicant(s) bank statements or use our Open Banking feature, which will pull through the information automatically.  

Navigating complex incomes & driving better outcomes 

The more we understand your customers, the better we can help serve them. With criteria on competition, we can be flexible when it comes to repayment on certain loans in your customer’s committed expenditure. Suppose your applicant, for example, has a small loan they are paying monthly for. In that case, we can work with you and your customer to discuss options of repaying that loan in full to remove or override it from the committed expenditure report. Taking these measures will, in turn, reduce their monthly commitments and open their affordability bracket to purchase the property they are hoping for. While this doesn’t work for every case we see, we’ve helped increase affordability for approximately 60 cases in October 2023 with our DIP overrides!

Speaking from a broker’s point of view, Sarah Morgan from Perfect Mortgages recently left us a 5* Trustpilot review, which said: “I’ve never in all my years as a mortgage adviser had a provider say to me, if you wait until… or if the customer pays x off, they will have access to a better deal… So as far as I am concerned absolutely amazing service and input from Bluestone. Thank you!!!”

We see real people who deserve to be considered for homeownership and look at each case on an individual basis. In the past, our lending policy has also allowed the applicant to move into a different credit tier, saving them thousands of pounds and giving them a better opportunity to afford their dream home.

Your opportunity for sustainable growth  

The demand for credit will always be around. It’s navigating a portfolio of customers with complex credit that traditionally is deemed tricky – contractors with inconsistent income, recent divorcees hoping to start over, first-time buyers looking to purchase a property with low credit, or those returning to work after a life event. While brokers have little influence on mortgage affordability, they can work with their customers to ensure they have a complete picture of the credit history and source lenders that match the applicant’s needs. With findings from our recent study showing that 8.1 million borrowers do not understand their mortgage in full, it is an opportunity for brokers to educate customers earlier in the mortgage process and work together to develop a robust and well-packaged case. If you want more information on the topic, contact our team at sales@bluestonemortgages.co.uk, who will gladly guide you to other resources.

Editor’s note: This post was originally published in November 2023.