Mortgage Affordability: Income Multiples vs Affordability Checks
Lenders no longer use simple income multiples alone — modern affordability tests consider income, outgoings, credit commitments, and stress-tested future rates.
1. Traditional Income Multiples
Historically, lenders used simple multiples such as 4× or 4.5× your annual income to determine the maximum loan. For example, someone earning £40,000 might be offered around £180,000. However, this method ignored personal circumstances like childcare, loans, and living costs, leading to riskier lending before 2008.
2. Modern Affordability Checks
Following the Mortgage Market Review (MMR) in 2014, lenders must check whether borrowers can afford repayments now and in the future. This involves:
- Income verification: Salaries, bonuses, benefits, or self-employment income.
- Fixed commitments: Credit cards, loans, student loans, or car finance.
- Regular expenses: Childcare, bills, subscriptions, and general living costs.
- Stress tests: Ensuring you could afford payments if rates rose by 3 percentage points or more.
3. Loan-to-Income (LTI) Limits
Most UK lenders cap loans at around 4.5× your household income. For joint applicants, this is based on combined income, though some may allow slightly higher ratios for certain professions or high-net-worth borrowers.
The Bank of England restricts how many mortgages lenders can issue above this 4.5× threshold — typically no more than 15% of new lending per quarter.
4. Debt Service Ratio (DSR)
The debt service ratio measures how much of your monthly income goes toward debt repayments. Lenders prefer this below 40%, and lower is better. If your DSR is high, they may offer you a smaller loan even if your income multiple looks fine.
5. Loan-to-Value (LTV) and Deposit Impact
The loan-to-value ratio (LTV) compares the mortgage amount to the property’s price. A higher deposit reduces LTV and improves your chances of approval and better rates.
| LTV Band | Deposit | Typical Rate Impact |
| 95% | 5% | High rate, limited choice |
| 85% | 15% | Better rates, more options |
| 75% | 25% | Access to best rates |
| 60% | 40% | Lowest available rates |
6. How to Improve Affordability
- Reduce unsecured debts before applying.
- Improve credit score and avoid recent credit applications.
- Increase deposit size where possible.
- Provide consistent, provable income (especially for self-employed borrowers).
7. Example Scenario
A couple earning £80,000 combined might expect a maximum loan of around £360,000 (4.5× income). But if they have childcare costs and car finance, affordability checks might cap this closer to £300,000. Adding a larger deposit can offset this reduction and lower their monthly payments.
8. Key Takeaways
- Lenders use affordability models, not just income multiples.
- Stress tests simulate future rate rises to ensure resilience.
- Lower debts and higher deposits both increase borrowing potential.
- Use tools like CalcFlow’s Mortgage Affordability Calculator to estimate your maximum loan safely.