Episode 2 | Mortgage affordability

Affordability, data and mortgage innovation

What does affordability really mean today?

In the second episode of our Powered by Partnership podcast, Francesco Di Pietro is joined by Kathryn McGee, Data Science Manager at Newcastle Building Society, and Rachel Geddes, Strategic Lender Relationship Director at Mortgage Advice Bureau.

Together, they explore how mortgage affordability is changing, from the way lenders assess income and expenditure to the growing role of data and personalised affordability. They also discuss product innovation, higher LTV lending and how brokers can help clients understand what may be possible in their current circumstances.

Affordability is about more than a number

Affordability is often reduced to income multiples or the interest rate a client can secure. But the discussion highlights a much broader picture.

Affordability can involve:

• The deposit a customer can provide.
• How much they can afford to borrow.
• Their monthly mortgage costs.
• Existing commitments and expenditure.
• Their individual financial circumstances.

The guests discuss how lenders are increasingly looking beyond a broad-brush approach and considering how affordability can be assessed more accurately for individual clients.

For brokers, understanding how lenders approach affordability can help when discussing options with clients and identifying potential routes forward.

Using data to personalise affordability

One of the key themes of the episode is how better use of data could help lenders make more personalised affordability decisions.

The conversation explores the potential of Open Banking and transactional data to provide a clearer picture of a client's financial circumstances, particularly when traditional affordability assessments do not capture the full picture.

The guests also discuss the importance of accurate information. Affordability models are only as useful as the data they are based on, while lenders also need to continually monitor their models to make sure they are producing appropriate customer outcomes.

As Kathryn explains, affordability is not simply about saying yes or no. It is also about making sure clients who could afford a mortgage are not unnecessarily excluded.

More flexibility doesn't mean more risk

The mortgage market has seen increasing innovation around affordability, including higher LTV lending and higher loan-to-income multiples.

The episode explores how these changes can create more opportunities for some clients, while also highlighting the importance of responsible lending.

The discussion looks at how lenders can balance innovation with responsible lending, making sure customers can afford their mortgage both today and in the future.

For brokers, this makes understanding individual lender criteria increasingly important. Knowing where flexibility exists could help identify options that may not be immediately obvious from a client's circumstances.

The role of the broker

The conversation also looks at where brokers can add the most value as affordability becomes more complex.

Broker advice can help clients:

• Understand what they may be able to borrow.
• Explore different mortgage options.
• Understand how affordability is assessed.
• Navigate more complex financial circumstances.
• Prepare for a future mortgage application.

The guests also discuss the importance of starting conversations earlier. A client may not be ready for a mortgage today, but that does not necessarily mean they will not be ready in the future.

For brokers, staying connected and continuing to educate clients can help support them from first considering home ownership through to submitting a mortgage application.

Key takeaways

Affordability is about more than a number

Income multiples are only one part of the affordability picture. Deposits, monthly costs, expenditure and individual circumstances all need to be considered.

Better data could support more personalised decisions

Open Banking and transactional data could help lenders understand clients in more detail and develop more personalised approaches to affordability.

Lender flexibility could open up more options

Understanding how different lenders assess affordability and where they have flexibility can help brokers identify potential routes for their clients.

Expert advice remains crucial

As affordability becomes more complex, brokers can help clients understand their options, navigate lender criteria and make informed decisions.

Staying connected matters

A client who isn't ready today may be in a different position tomorrow. Continuing the conversation can help brokers support clients throughout their journey.