Sunday, November 5, 2006

Standard Life encourages responsible lending

Mortgages should be based on affordability not multiples - Standard Life

Standard Life Bank is insisting that mortgage providers should lend on affordability rather than salary multiples. To lend responsibly, Standard Life Bank believes that reviewing an individual's full financial situation is essential when making a decison as to how much to lend. The flexible mortgage specialist, which was an early adopter and pioneered the practice of lending on affordability as early as 1999, considers a would-be homeowner's income and financial commitments rather than simply a multiple of their current salary and the equity in the property (the Loan to Value position).

Posted by converted lurker @ 01:40 AM (375 views)
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4 thoughts on “Standard Life encourages responsible lending

  • I didn’t realise anybody calculated mortgages this way. Sounds very sensible to me. Shouldn’t reduce the amount loaned though to people with good credit history and low debts.

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  • Of course all they have to do now is accurately predict an individuals precise financial situation over the next 25 years, along with accurate forecasts of interest rates, and of course accurate predictions of serious illness and unemployment, and hey presto! It will work!

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  • Most of the shift to the new paradigm of affordability as opposed to standard salary multiples as touted by all the lenders, it typically takes the form of:
    Lender: “Can you afford to borrow 5 * your income”
    Customer: “Yes”
    Lender: “Great we can lend you 5.5 * income too if you can afford it”

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  • Yes – they could at least add an “Are you sure you’ll still be able to afford it when interest rates are 15%?”

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