Barclays has announced a major overhaul of its mortgage affordability criteria, increasing the proportion of bonus, overtime and commission income it will take into account when assessing applications.
The bank will now consider these income streams up to four times a customer’s basic salary plus allowances – a significant increase on the previous cap, which limited the amount to the equivalent of the basic salary and allowances combined.
Under the new rules, an applicant earning £30,000 a year in basic pay and £120,000 in commission could have up to £150,000 of total income recognised for affordability purposes. Previously, only £60,000 would have been taken into account.
The change is designed to help borrowers in commission-led or performance-driven sectors, who often have higher overall earnings but face restrictions under traditional affordability models.
Lee Chiswell, head of mortgages at Barclays, said: “We know that affordability is probably the greatest barrier for most consumers who want to buy a home. 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.”
The move follows a series of enhancements to Barclays’ lending criteria this year, including revised affordability calculations for self-employed, interest-only and buy-to-let borrowers.
Earlier changes to the bank’s affordability model have allowed families to borrow up to £30,750 more, depending on their financial circumstances and borrowing history. Barclays has also increased its maximum loan amounts for high loan-to-value purchases, now up to £640,000 for houses and £310,000 for flats, to help more buyers access homes in higher price brackets with just a 10% deposit.
In addition, the lender has expanded its range of initiatives aimed at supporting home ownership, such as Mortgage Boost – which allows family or friends to help increase the amount that can be borrowed without providing funds directly – and a zero-deposit mortgage for Right to Buy applicants.
To qualify for the new income consideration, bonus, overtime and commission payments must be paid at least monthly.
