As interest rates began to stabilise and edge lower, many borrowers expected a corresponding improvement in mortgage affordability. Lower rates should, in theory, mean lower monthly payments and increased borrowing capacity.
In 2026, that expectation is proving misleading.
At Willow Private Finance, we are consistently seeing borrowers with strong incomes and clean credit profiles surprised by how little their borrowing power has improved. In some cases, affordability even appears tighter than it was during higher-rate periods.
This disconnect is not accidental. It reflects a fundamental shift in how lenders assess affordability following the volatility of recent years.
The key misunderstanding is the assumption that affordability calculations are driven primarily by product rates.
In reality, most lenders base affordability on stressed assumptions rather than the actual rate a borrower will pay. These stress rates were increased significantly during the 2023–2024 period and, crucially, have not been reduced in line with easing rates.
In 2026, lenders remain focused on long-term resilience rather than short-term affordability. Even where rates are lower today, lenders continue to assess whether borrowers could withstand future increases or sustained economic pressure.
As a result, lower rates provide comfort—but not generosity.
In previous cycles, stress testing moved with the market. When rates rose, stress buffers widened; when rates fell, they relaxed.
That relationship has broken down.
In 2026, stress testing is no longer a temporary safeguard. It is a permanent control embedded into lender risk frameworks. Many lenders now assess affordability at rates significantly above current products, regardless of the direction of travel.
This change alone explains why affordability feels stubbornly constrained, even as headline pricing improves.
Another major factor is how lenders assess living costs.
Even where borrowers demonstrate modest real-world spending, lenders apply standardised expenditure models that reflect post-pandemic cost realities. Utilities, food, insurance, transport, and childcare assumptions are all materially higher than they were pre-2024.
These assumptions are applied consistently, meaning high earners are not immune. In fact, higher incomes often attract higher assumed expenditure, further eroding affordability.
Borrowers frequently underestimate how much these models reduce borrowing capacity before income is even fully considered.
For borrowers with bonuses, commission, dividends, or self-employed income, the effect is amplified.
In 2026, lenders are more cautious about income that fluctuates, even when historic performance is strong. Averaging periods are longer, exclusions are more common, and underwriters are less willing to assume future continuity.
This means two borrowers with the same headline income may experience very different affordability outcomes depending on how that income is earned, as explored in our article on why buyers with the same income receive different mortgage offers.
Affordability is no longer just about income versus mortgage payment.
Lenders now examine wider financial behaviour more closely. Existing loans, car finance, credit cards, and even habitual overdraft usage materially affect affordability outcomes.
In 2026, lenders are less willing to “net off” consumer debt against high income. Instead, they treat ongoing commitments as structural liabilities that reduce resilience, regardless of repayment history.
This is one reason borrowers often feel affordability has tightened without any obvious change in their circumstances.
From a borrower’s perspective, affordability feels artificial. Many can comfortably manage repayments at today’s rates, even with margin to spare.
From a lender’s perspective, affordability is about protecting against scenarios where conditions deteriorate. The models used in 2026 are designed to answer a different question: not “Can this borrower pay today?” but “How likely is this borrower to struggle under pressure?”
This philosophical shift explains much of the frustration borrowers experience.
We regularly see borrowers with six-figure incomes who expect borrowing capacity to increase as rates ease. Instead, they encounter the same or lower limits than before.
The reason is almost always stress testing combined with cost assumptions. Once these are applied, headline income becomes far less powerful than borrowers expect.
Without proactive structuring or lender selection, affordability ceilings remain stubbornly fixed.
The key adjustment borrowers must make is to stop viewing affordability as a function of rate movement alone.
In 2026, affordability is shaped by stress models, behavioural analysis, income sustainability, and cost assumptions. Rates matter—but they are only one component of a much larger assessment.
Borrowers who understand this are better placed to plan, restructure, or adapt their approach rather than waiting for affordability to “improve” organically.
Willow Private Finance advises clients based on how affordability is actually assessed, not how it appears on rate tables.
We identify lenders with more flexible stress models, structure applications to present income and commitments effectively, and advise on when restructuring debt can materially improve outcomes.
This is particularly valuable for high earners, self-employed borrowers, and clients navigating large or complex transactions in a constrained affordability environment.
Q1: Why hasn’t affordability improved as rates fall in 2026?
A: Because lenders continue to use high stress rates and conservative cost assumptions.
Q2: Do lenders assess affordability using my actual mortgage rate?
A: Rarely. Most lenders apply a higher notional rate to test long-term resilience.
Q3: Does high income guarantee better affordability?
A: No. Higher incomes often come with higher assumed living costs and scrutiny.
Q4: Are self-employed borrowers affected more?
A: Yes. Variable income is assessed more cautiously in 2026.
Q5: Can a broker improve affordability outcomes?
A: Yes. Lender selection and case structuring can materially affect results.
Book a free strategy call with one of our mortgage specialists.
We’ll help you find the smartest way forward—whatever rates do next.
About the Author
Wesley Ranger is the Director of Willow Private Finance and has over 20 years’ experience advising clients on UK and international property finance. He specialises in affordability structuring, complex income cases, and helping borrowers navigate lender risk models in changing market conditions.
Important Notice
This article is for general information purposes only and does not constitute personal financial advice. Mortgage affordability assessments, stress testing, and lending criteria vary by lender and may change at any time.
Your eligibility will depend on your individual circumstances and lender policies. Always seek tailored advice before committing to any financial arrangement.
Willow Private Finance Ltd is authorised and regulated by the Financial Conduct Authority (FCA No. 588422). Registered in England and Wales.
