Broker Perspective: Buyers increasingly choose affordability over borrowing power
Mortgage borrowers are increasingly approaching advisers with a clearer idea of what they can afford, rather than focusing solely on the maximum amount they may be able to borrow, brokers have said.
Chris Sykes, co-founder of MSP Financial Solutions, said that, over the last few years, borrowers have shifted from asking, “what’s the maximum a lender can give me?” to, “what can I afford to borrow?”.
He said some clients now come to advisers with a pre-calculated budget in mind, which can mean they ultimately borrow less than a lender may be willing to offer.
Sykes added that borrowers had become more responsible in how they approach borrowing.
Dan Gracie, co-founder of Pavilion, said borrower behaviour often varies depending on where they are in their borrowing journey.
He said those who are earlier in the process are often trying to establish how much they can borrow, while more sophisticated borrowers tend to have a clearer understanding of what they can borrow before seeking advice.
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Affordability assessments can vary widely
The brokers also discussed differences in lender affordability assessments.
Gracie said the gap between borrowers’ financial reality and lender affordability assessments was narrowing, but added that outcomes can still vary depending on the lender.
“It’s never the same,” he said, explaining that some affordability calculators can appear over-generous while others are more closely aligned to a borrower’s circumstances.
Gracie said advisers help guide borrowers towards the right lender and argued that it was “marvellous” that lenders assess affordability differently, as this can provide borrowers with a wider range of options.
Open banking and AI could support more tailored assessments
Sykes said affordability assessments are currently being conducted “the way it is because it has to be at the moment”.
However, he said further integration of open banking and artificial intelligence (AI) into lender systems could eventually lead to more bespoke affordability calculations.
He suggested this could help lenders assess more complex cases in greater detail.
Sykes said there was already a “pretty good understanding” of affordability, but added there were opportunities for some cases to be examined more deeply.
Both brokers also highlighted the importance of responsible lending, with Sykes saying advisers have a responsibility to lend responsibly as well as help borrowers secure finance.
