How Mortgage Affordability Is Calculated in the UK

Income multiples: the starting point

The simplest way to estimate how much a lender will offer you is the income multiple. This is your gross annual income multiplied by a factor, typically between 4 and 5.5 times.

For example, if you earn £40,000 a year, a lender using a 4.5x income multiple would consider lending you up to £180,000. A lender using 5.5x would consider up to £220,000. That is a £40,000 difference from the same income.

Most high-street banks in the UK use an income multiple somewhere between 4x and 5.5x, but the exact figure depends on your circumstances. Some lenders offer higher multiples to first-time buyers, to applicants with larger deposits, or to those in certain professions such as doctors or solicitors.

For joint applications, lenders add both incomes together before applying the multiple. A couple earning £35,000 and £30,000 (£65,000 combined) at 4.5x could borrow up to £292,500.

Stress testing and affordability models

Income multiples are only the starting point. Every UK lender is required by the Financial Conduct Authority (FCA) to carry out a detailed affordability assessment before approving a mortgage. This goes well beyond a simple salary calculation.

Lenders use an internal stress test to check whether you could still afford your mortgage payments if interest rates were to rise. They typically apply a stress rate that is higher than the actual product rate you would pay. For example, even if you are applying for a fixed-rate mortgage at 4.5%, the lender might stress-test your payments at 7% or 8% to ensure you could cope if rates increased after the fixed period ends.

Each lender sets its own stress rate, and this is one of the biggest reasons why different lenders offer different maximum borrowing amounts. A lender with a 6.5% stress rate will typically offer more than one using 8%, even if their headline income multiples look similar.

Alongside the stress test, lenders build a detailed model of your monthly finances. They calculate your expected mortgage payments at the stressed rate and compare this against your monthly income minus all committed expenditure. If there is enough surplus income left over, they approve the loan.

What counts as income?

How lenders treat different types of income has a significant impact on your maximum borrowing. Here is how the main income types are typically assessed:

Basic salary: Accepted at 100% by all lenders. This is the most straightforward income type.

Overtime: Most lenders accept overtime, but the percentage varies. Some accept 100% if it has been consistent for at least 12 months, while others cap it at 50% or require a two-year track record.

Bonus income: Similar to overtime, the treatment varies widely. Some lenders take an average of the last two or three years, others use the lower of the last two years, and a few do not accept bonus income at all.

Commission: Regular commission is typically averaged over two years. Lenders that specialise in sales professionals may be more generous.

Self-employed income: For sole traders, most lenders use the average of the last two or three years of net profit. For limited company directors, most now accept salary plus net profit (or dividends), though the calculation method differs between lenders. Some still require three years of accounts.

Rental income: If you already own buy-to-let properties, some lenders include a percentage of rental income in your overall affordability assessment.

The differences in how lenders treat these secondary income types are exactly why checking multiple lenders is so valuable. If you receive a significant bonus or have a strong overtime track record, the gap between the most and least generous lender can be tens of thousands of pounds.

How outgoings affect affordability

Your outgoings reduce the amount a lender is willing to offer. The key items that affect your affordability include:

• Existing credit commitments — credit card balances, personal loans, car finance, and hire purchase agreements. Even if you pay your credit card in full each month, many lenders apply a percentage of the credit limit (typically 3% to 5%) as a notional monthly commitment.
• Childcare costs — nursery fees, childminder costs, and after-school care.
• Child maintenance — court-ordered or voluntary maintenance payments.
• Student loan repayments — calculated based on income using the relevant plan threshold (Plan 1, Plan 2, or Postgraduate).
• Council tax and utilities — some lenders factor in estimated household bills, while others use Office for National Statistics (ONS) benchmarks.

The way lenders treat outgoings varies. Some use declared expenditure, others apply minimum floors based on household size, and some use a combination. This is another area where differences between lenders can significantly affect your result.

Why different lenders offer different amounts

By now it should be clear that mortgage affordability is not a single, universal calculation. Each lender has its own:

• Income multiple (ranging from 4x to 5.5x or higher)
• Stress rate (ranging from about 6% to 8.5%)
• Rules for accepting overtime, bonus, and commission
• Treatment of self-employed income
• Minimum expenditure floors
• Credit commitment calculations

The result is that the same borrower, with exactly the same income and outgoings, can receive maximum lending figures that vary by £50,000 or more depending on the lender.

This is why tools that only check a single lender, or that use a generic 4.5x income calculation, can be misleading. They give you one answer when the reality is a range.

The 2022 affordability test removal

In August 2022, the Bank of England removed the affordability stress test that had been in place since 2014. This test, introduced by the Financial Policy Committee (FPC), required lenders to check whether borrowers could afford payments if the Bank of England base rate rose by 3 percentage points above the lender's standard variable rate.

The removal of this test did not mean lenders stopped stress-testing altogether. The FCA's separate affordability rules remain in place, and every lender still applies its own internal stress test. What the removal did was give lenders more flexibility in setting their own stress rates, which has led to greater variation between them.

In practice, the removal had a modest impact. Some lenders marginally increased their maximum lending, while others made no change at all. The loan-to-income (LTI) flow limit, which restricts the proportion of mortgages a lender can offer at 4.5x income or above, remains in place and continues to be the binding constraint for many borrowers.

Mortgage affordability rules in 2026

As of early 2026, the key rules governing mortgage affordability in the UK are:

• FCA MCOB rules: Lenders must carry out a detailed affordability assessment considering income, committed expenditure, and essential living costs. Responsible lending remains the overarching principle.
• LTI flow limit: No more than 15% of a lender's new residential mortgage lending can be at or above 4.5x the borrower's income. This is a quarterly limit and is the primary constraint preventing lenders from lending at very high multiples across their whole book.
• Individual lender stress tests: Each lender sets its own stressed interest rate for affordability calculations. These typically range from 6% to 8.5% and are applied to ensure borrowers can still afford payments if rates rise.
• Mortgage Guarantee Scheme: Extended to support 95% LTV lending. Lenders participating in this scheme may have slightly different affordability criteria for high-LTV borrowers.

The base rate as of March 2026 stands at 3.75%, having been gradually reduced from its peak. Mortgage product rates have followed, typically ranging from around 3.5% to 5.0% depending on the product type and LTV. Lender stress rates remain above these product rates, creating a buffer for potential future increases.

Why checking multiple lenders matters

If every lender used the same affordability model, checking one would be enough. But they do not. The variation between lenders means that the amount you can borrow depends heavily on which lender you approach.

This is particularly important if you:

• Receive a significant portion of your income through bonus, overtime, or commission
• Are self-employed or a company director
• Have existing credit commitments you are managing
• Are stretching to buy a property at the top of your budget
• Have a complex income structure with multiple sources

Traditionally, checking multiple lenders meant either speaking to a mortgage broker (who would manually assess a handful of lenders) or visiting individual lender websites one by one and entering your details into each calculator separately.

Mortgage Affordability changes this by checking your affordability across 58 UK lenders simultaneously. You enter your details once, and we connect to each lender's actual affordability calculator to give you results from every major bank, building society, and specialist lender in one report.