Bank to consider higher levels of variable income in affordability checks
Barclays has updated its approach to mortgage affordability by increasing the proportion of bonus, overtime, and commission income it will factor into lending decisions.
The bank will now include these forms of income up to four times a borrower’s basic salary plus allowances, a significant rise from the previous cap, which limited such income to the value of the basic salary and allowances.
Under the revised policy, an individual earning a basic salary of £30,000 and £120,000 in commission could now have up to £150,000 considered as income, compared with £60,000 under the former rules. This change is expected to benefit applicants in sectors where variable pay forms a substantial part of total earnings.
The adjustment follows a series of recent enhancements to Barclays’ affordability calculations, which have included updates for self-employed applicants, interest-only borrowers, and buy-to-let customers.
“We know that affordability is probably the greatest barrier for most consumers who want to buy a home,” said Lee Chiswell, head of mortgages at Barclays. “We’ve taken a long look at how we can support customers, particularly first-time buyers, and as a result have made several tweaks to our lending criteria.
“Taken together, these will make all the difference for a range of people with different income types, getting people into homes that would previously have been out of reach.”
To qualify for the increased allowance, bonus, overtime, or commission income must be paid at least monthly.
Earlier this year, Barclays has introduced measures to improve access to home ownership. These include changes that could allow a family to borrow up to £30,750 more, subject to application and financial circumstances. The bank has also raised its maximum loan amounts for high loan-to-value purchases, now offering up to £640,000 for houses and £310,000 for flats with a 10% deposit.
In addition, Barclays has launched new products such as Mortgage Boost, which enables family or friends to help increase the amount that can be borrowed without providing funds directly, and a zero deposit mortgage option for Right to Buy applicants.
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