Minimum pension savings should count – AMI chief

Minimum pension savings should count – AMI chief

Association of Mortgage Intermediaries chief executive Robert Sinclair has said he can understand if minimum pension contributions count toward mortgage affordability calculations.

Mr Sinclair said: “We should not be telling people to stop making pensions payments,” but added: “If this is a minimum contribution into a pension maybe it should be dragged into affordability calculations.”

However, he said: “If they are making additional contributions they can be flexible in times of financial stress.”

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At the moment, people being auto-enrolled under the government’s scheme are paying a 1 per cent contribution.

His comments follow discussions between AMI, the Council of Mortgage Lenders and pensions minister Steve Webb in December, which were sparked by department for work and pensions concerns over suggestions that some lenders had been advising potential borrowers to stop paying into pensions in order to make their income appear bigger.

When asked if the issue had been resolved, a spokesman for the CML said: “Lenders are likely to continue to view pension contributions as part of a broad range of factors that may shape the decision to lend affordably and responsibly in individual cases.”

Paul Broadhead, head of mortgage policy for the Building Societies Association, said pension savings were a responsible action, but added: “The objective of assessing affordability is common sense – can the borrower afford to maintain all their regular payments after their mortgage is completed?”

Some lenders said a pension could be taken into account when assessing affordability. A spokesman for Santander said: “If someone makes payments into a pension, that money is not available to pay a mortgage and as a responsible lender, we have to take that into consideration when assessing affordability.”

Adviser view

Kevin Morgan, managing director of Hertfordshire-based Consilium Financial Planning, said: “The lenders should take a more holistic approach to affordability and not look at one factor in isolation.”