Chief executives from three UK lenders have written to the chair of the Treasury Select Committee to emphasise the need for the Bank of England to raise the loan to income (LTI) flow limit.
The chief executives of Skipton Group, Yorkshire Building Society and Nationwide have jointly written to the BOE’s Financial Policy Committee chair Dame Meg Hillier MP in hopes of raising the LTI from it’s current rate of 15%, which limits how much more mortgage lending can be provided at more than 4.5x income.
The banks believe that increasing the limit would allow lenders to responsibly support more first-time buyers, helping more people have a home.
In the meantime, Skipton Building Society (part of Skipton Group) has made changes to its lending criteria, in effect from Monday 9 June.
Key updates include:
- Reduced residential stress rate for shorter-term products – Customers taking a mortgage with a product term under five years will receive a lower stress rate, meaning shorter terms will no longer negatively affect borrowing potential.
- Lower income threshold for higher loan-to-income (LTI) – The minimum income required to access a 5.5x LTI has been halved from £100,000 to £50,000, opening up greater borrowing potential to a wider group of customers.
- Increased maximum LTI for higher LTV lending – For customers with a loan-to-value (LTV) between 90.01% and 95%, the maximum LTI has been increased from 4.75 to 5, provided the household income exceeds £50,000.
Skipton chief executive of homes Charlotte Harrison says: “At Skipton, we continue to recognise the growing affordability challenges facing first-time buyers.
“Adjusting stress rates alone isn’t always enough, as many would-be buyers are still impacted by the limitations the Loan to Income (LTI) cap place on our lending. That’s why we’re taking a more comprehensive approach by revising both, while remaining within the current cap.
“And as a result of the changes we’ve made, loan sizes could increase by up to £45,000 (+16%) for a typical household earning £60k.
“We continue to support calls for a review of the LTI flow limit. In the meantime, as part of our commitment to supporting more first time buyers, we’re making changes to the stress rate, lowering the income requirement to access larger loans, whilst increasing our LTI policy at 95% LTV.”
