What Is Mortgage Affordability?
Mortgage affordability refers to the maximum amount lenders will let you borrow based on your income, expenses, and financial circumstances. It's not just about what you can afford monthly—lenders assess your ability to maintain payments throughout the mortgage term, including potential rate rises.
2025 Lending Environment
Current stress testing requires lenders to assess affordability at rates 3% above the loan rate, making approval more challenging but ensuring borrowers can handle future rate increases.
How Lenders Calculate Affordability
Income Multiples
Most lenders use income multiples as a starting point:
Single Applicant
Typically 4.5x annual salary, though some lenders offer up to 5.5x for certain professionals or high earners.
Joint Applicants
Usually 4.5x combined income, or sometimes calculated as highest income + 1x second income.
Professional Mortgages
Doctors, lawyers, and accountants may access higher multiples (up to 6x) due to career stability.
High Net Worth
Wealthy borrowers may qualify for different criteria based on assets rather than just income.
Affordability Assessment
Beyond simple multiples, lenders conduct detailed affordability assessments:
Monthly Affordability Calculation
Net Monthly Income: £4,500
Essential Outgoings: £2,200
Discretionary Spending: £800
Buffer for Rate Rises: £300
Available for Mortgage: £1,200
This would support a mortgage of approximately £250,000-280,000 depending on term and rates.
Key Assessment Factors
Income Considerations
- Basic Salary: Usually 100% counted if permanent employment
- Overtime: Typically 50-100% if regular over 6-12 months
- Bonuses: Usually averaged over 2-3 years, often at 50-75%
- Commission: Generally averaged and reduced percentage applied
- Self-Employed: Usually require 2-3 years' accounts/SA302s
- Contract Work: May need longer track record, higher rates
Expenditure Categories
| Category | Assessment Method | Impact on Affordability |
|---|---|---|
| Essential Bills | Actual amounts or statistical models | Direct reduction |
| Credit Commitments | Minimum payments or higher | Significant reduction |
| Childcare | Actual costs | Direct reduction |
| Living Costs | Statistical assumptions | Standard deduction |
Stress Testing
Rate Rise Testing
Lenders must verify you can afford payments if rates increase:
- Fixed Rate Mortgages: Tested at rate + 3% or lender's standard variable rate
- Variable Rate Mortgages: Tested at current rate + 3%
- Interest-Only: Additional stress testing for capital repayment
Stress Test Example
Applied Rate: 4.5% fixed for 5 years
Test Rate: 7.5% (4.5% + 3%)
Monthly Payment at 4.5%: £1,389
Monthly Payment at 7.5%: £1,847
You must afford the higher amount
Improving Your Affordability
Increase Your Income
- Salary Negotiations: Even small increases significantly impact borrowing
- Bonus Documentation: Ensure bonuses are properly recorded
- Side Income: Freelance or consulting work (if regular)
- Joint Applications: Include partner's income
- Guarantor Mortgages: Family member guarantees payments
Reduce Your Outgoings
- Pay Off Debts: Clear credit cards and personal loans
- Close Unused Credit: Cancel unused cards and accounts
- Reduce Regular Payments: Lower mobile, insurance, subscription costs
- Delay Major Purchases: Avoid car finance before mortgage application
Timing Strategies
- Employment History: Stay in job for 6+ months before applying
- Credit History: Build consistent payment record
- Deposit Timing: Higher deposits improve affordability calculations
- Rate Environment: Apply when rates are favorable
Calculate Your Affordability
Use our affordability calculator to estimate your maximum borrowing capacity and monthly payments.
Check AffordabilityCommon Affordability Challenges
Self-Employed Borrowers
Face additional scrutiny due to variable income:
- Need 2-3 years of accounts or SA302 forms
- May need to provide future contracts or pipeline evidence
- Often get lower income multiples
- Consider specialist self-employed lenders
High Outgoings
Borrowers with significant existing commitments:
- Consider debt consolidation before applying
- Look at longer mortgage terms to reduce payments
- Explore interest-only options (with repayment strategy)
- Consider guarantor mortgages
Variable Income
Commission-based or irregular income challenges:
- Provide longer income history
- Use specialist lenders familiar with your profession
- Consider applying during high-earning periods
- Document income stability and growth trends
Professional Advice
When to Seek Help
Consider professional mortgage advice if you have complex income, credit issues, or need to maximize borrowing capacity. Brokers can access specialist lenders and present your application in the best possible light.