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A&L and HBOS back affordability over income multiples

Two of the UK’s biggest lenders have stressed the importance of using affordability calcu-lations rather than income multiples.

Alliance & Leicester and HBOS have both stressed that affordability is a far more advanced method to assess whether a customer has the ability to repay.

The comments come after Abbey said two weeks ago that it would lend up to five times salary. The move has been opp-osed by some, even though such lending is commonplace in the market, with Darlington Building Society offering up to six times salary.

This week, Southern Pacific Mortgage replaced income multiples with an affordabil-ity calculation that assesses the applicant’s ability to make repayments on the basis of debt to income ratios, with a maximum DTI of 53 per cent.

A&L spokeswoman Sally Lauder says: “We do not have a maximum income model. Income multiples are a clumsy way of calculating. For us, it is done purely on affordability. There is still the opportunity to lend high amounts but it is on a low-risk basis as it is lent on the ability to repay.”

HBOS spokesman Paul Fincham says: “We have been lending on affordability for five or six years so we take into account the person’s indiv-idual situation and credit commitments.”

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