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  • Writer's pictureMatthew Pigrome

Navigating Affordability Changes in the Mortgage Market: Alternative Solutions

In today's evolving mortgage landscape, borrowers looking to remortgage their properties are facing a new challenge - changes in affordability criteria set by lenders. Many are finding themselves unable to reach their desired borrowing levels, leaving them searching for alternative options. Let's explore this issue and provide insights into possible solutions.


The Challenge of Meeting Affordability Criteria

Lenders' shifting affordability criteria have made it challenging for some mortgage borrowers to secure the remortgage they need. This has been especially true for those who might have been impacted by changes in income or expenses, making it difficult to meet the stringent requirements set by lenders. In such cases, borrowers might find that they're unable to access the same level of borrowing as before, hindering their ability to refinance at competitive rates.


Exploring Alternative Options

For borrowers facing affordability hurdles, there are several alternative options to consider:

  1. Review Financials: Begin by reviewing your financial situation. Are there any areas where you can make adjustments to improve your affordability? Working with a mortgage advisor can help you identify potential changes that might enhance your borrowing capacity.

  2. Extend the Term: Lengthening the mortgage term can help reduce monthly payments and increase affordability. While this may lead to higher overall interest payments, it can provide short-term relief.

  3. Seek Specialist Lenders: Specialist lenders often have more flexible criteria, allowing borrowers with unique circumstances to secure financing. Exploring these lenders can open up new opportunities.

  4. Opt for a Product Transfer: If your current lender offers a product transfer, it might be worth considering. Since product transfers are often based on existing relationships, they can provide a more straightforward way to refinance without undergoing stringent affordability assessments.


Buy-to-Let Challenges and Alternatives

Current buy-to-let landlords are also grappling with changes in affordability criteria, particularly the use of a higher assumed notional rate within an interest coverage ratio (ICR) calculation. This means that many landlords are finding it harder to remortgage their investment properties.


For buy-to-let landlords facing these issues, alternatives could include:

  1. Portfolio Review: Assess your property portfolio. Is there a way to adjust your holdings to meet lenders' criteria? Some lenders might be more accommodating if you can show a diversified and sustainable portfolio.

  2. Consider Specialist Buy-to-Let Mortgages: Just like with residential mortgages, specialist lenders might have more lenient criteria for buy-to-let properties. Exploring this option could provide the solution you need.

  3. Opt for a Limited Company Structure: Some landlords are exploring the option of transferring their properties into a limited company structure. While this comes with its own considerations, it could potentially offer better affordability metrics.

In conclusion, changing affordability criteria in the mortgage market have brought forth challenges for borrowers seeking to remortgage their properties or buy-to-let investments. However, alternative solutions such as reviewing financials, seeking specialist lenders, extending the term, or considering a limited company structure can offer pathways to achieve your financial goals.


As always, consulting with mortgage experts like Mortgage321 can provide tailored advice to guide you through these changing dynamics.




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