Clydesdale Bank is set to introduce a series of changes to its mortgage criteria for self-employed applicants, including a more generous income assessment for directors and a higher loan-to-income cap.
The revised policy comes into effect from Friday 18 July.
One of the most significant adjustments affects limited company directors holding a 25% or greater shareholding. Under the current policy, Clydesdale assesses income based on the applicant’s share of net profit before corporation tax, plus their salary, averaged over two years.
From next week, this will switch to using net profit after corporation tax. The bank will continue to use the lower of the two years if earnings have declined.
The lender said there will be no change to income calculations for other trading types, including sole traders, partnerships and LLPs.
Clydesdale is also increasing its maximum loan-to-income ratio for self-employed applicants. The current cap of 4.49 times income will rise to 5 times income for residential purchase lending. However, the existing 5.5 times income cap for residential remortgages up to 85% loan to value with no additional borrowing will remain unchanged.
Further easing of criteria includes a reduced trading history requirement. Currently, self-employed borrowers must demonstrate a minimum of three years’ trading; under the new policy, two years will be sufficient.
In addition, the age of the most recent financial accounts will be extended. At present, accounts must have a year-end no older than 18 months from the application date; this will increase to 21 months, provided the accounts are not overdue by government standards.
The lender’s online application system will be temporarily unavailable from 6pm on Thursday 17 July while the updates are implemented. Applications submitted under the current policy must be received by 5pm the same day.
Clydesdale has also signalled that it will unveil further enhancements to its foreign national lending policy on Friday 18 July. These are expected to include a higher maximum loan to value, an expanded list of acceptable visa types, and reduced minimum time requirements remaining on those visas. Further details will be announced on the day.
