NatWest lowers mortgage affordability calculation caps

NatWest Mortgages

NatWest Mortgage affordability to reduce

Mortgage affordability is generally assessed across three factors by Lenders in the current market.

1. General affordability

This is an assessment of how net income fits with expected outgoings.

Each lender calculates this in their own way with different rating to various expenditure elements such as family size, existing debt, and pension contributions.

2. Stress test

The regulator also insist that the residential mortgage lender confirms that the borrower will be able to continue to afford the mortgage payment if mortgage rates rise. The rates used for this calculation can be relatively aggressive when compared to current mortgage rates, perhaps 7%.

3. Maximum income multiple cap

Finally, lenders will cap off maximum mortgage lending by using a simple multiple cap calculated against gross income. This is often set at a different factor for differing loan to value rates and this is the case with Nat West.

Today’s announcement means that Nat West are bring down their cap by some 10% for the majority of borrowers.

NatWest Mortgage lending up to 75% loan to value

Maximum lending cap reduces from 4.99 times income to 4.49 times income

NatWest Mortgage lending 85% loan to value

Maximum lending cap reduces from 4.49 times income to 4.45 times income

Mortgage lending above 85% loan to value

Maximum lending cap unchanged at 4.0 times income

So how do I know how much I can borrow?

To get an assessment of your maximum mortgage lending with NatWest, or any other lender, have your mortgage broker run the calculations on your behalf.

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