How much can I borrow?  Mortgage lenders traditionally lent a multiple of your income.  This was known as the loan-to-income ratio.  If your annual income was £40,000 you might have been able to borrow 3-5 times this, up to £200,000.

Mortgage lenders must now take a more sophisticated approach to the amount they lend.  This assessment is  based on your income and outgoings, from living expenses to other debt repayments.  Lenders call this the affordability assessment. In making this assessment, the lender must also look ahead. They must ‘stress test’ your ability to repay the mortgage.

This takes into account the effect of possible

  • interest rate rises; and
  • changes to your lifestyle, such as redundancy, starting a family or taking a career break.

If the lender thinks you won’t be able to afford your mortgage payments in these circumstances, they might limit your mortage.