HSBC has made a positive change to its bonus income policy for mortgage borrowers and increased the amount applicants need to earn to secure a 4.49-times salary income multiple.
Last year HSBC introduced a range of temporary policy changes due to the Covid-19 pandemic, limiting the use of variable income to certain employers/professions and frequencies of pay to enable the bank to continue to lend responsibly.
Thankfully the lender has reassessed its lending policy and removed the temporary income policy restrictions. For any new applications submitted from Monday 15th February, the following policy changes will be applied when assessing employed customers' income.
Variable income mortgages - In addition to accepting the bonus, commission and overtime paid weekly, fortnightly, four-weekly and monthly, HSBC will now take variable income paid quarterly, half-yearly and annually. The bank will use 50% of the income when calculating how much you can borrow.
If you receive a quarterly bonus payment: The bank will use the annual income figure at the application stage and will continue to calculate the maximum loan using the average income received across the number of payslips/award letters required. This will be confirmed on application.
For half-yearly and annual payments: Annual income at the application stage will continue to be the lower of the two-year average or latest year received across the number of payslips/award letters required (e.g. four for half-yearly, two for annually). The payslips/award letters must include a half-yearly or annual payment received on 1st January 2021 or more recently.
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With effect from Monday 15th February, borrowers earning less than £50,000 will be able to borrow 4.49 times income. The 4.49 times income multiple was capped at £30,000.
For mortgage applications where the borrower has less than a 15% deposit, and the total income is between £50,000 and £100,000, they will be able to borrow 4.75 times income. When the total income is £100,000 and above this rises to five times single or joint salaries.
For applications with a deposit of 15% or less earning up to £100,000 - they will be able to borrow 4.49 times income. When they earn £100,000 or more, this rises to 4.75 times salary.