Pepper Money has made a series of improvements to its lending criteria to help customers maximise their affordability when they apply for a mortgage.

The specialist lender has increased the amount of variable income it will consider as part of an affordability calculation and can now include 100% of monthly bonus or commission and 100% of overtime payments. On both, it had previously considered 50% towards affordability.

In addition, Pepper Money can now consider 50% annual or quarterly bonus or commission and 50% rental income towards a customer’s affordability calculation.

Meanwhile, Pepper Money is also introducing the new option of a 40-year term to help customers spread their payments over a longer period, enhancing their affordability and increase their disposable income.

Paul Adams, sales director at Pepper Money, said: “At Pepper Money, we’re always looking to respond to market trends and help customers to overcome the challenges that stand in the way of them achieving their goals. Property prices may be softening, but the ongoing cost-of-living crisis and higher interest rates mean that mortgage affordability continues to be a challenge. At Pepper we take a considered approach to any changes which may impact you and your customers. Our Specialist Lending Study identifies customers’ monthly budgets are getting tighter due increased food and energy costs. Whilst extending your customers’ term may not be appropriate for all customers, it’s important we provide a wide range of mortgage options to meet the changing needs of your customers.

“By increasing our consideration of variable income, we’re fairly rewarding customers for their additional work or performance related pay. The introduction of 40-year terms not only helps to maximise affordability, but also reflects shifting working trends, as people work until later in their life. The state pension age will increase from 66 to 67 by 2028, is legislated to rise again in the mid 2040s to 68 and is expected to rise to 70 by 2050. People are working for longer, which means they can maintain mortgage payments over a longer term. It makes sense then that we should be able to help them now by providing the option to spread their mortgage repayment over a longer period, which could help to lower monthly payments or increase their borrowing power.”