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Mortgage lenders offering higher loan to income mortgage ratios

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17/01/2018
Lenders are offering more generous loan sizes compared to income, with one provider now offering up to six times earnings.

Lenders are taking a more relaxed attitude towards higher loan to income (LTI) ratios, as buyers struggle with affordability following years of house price growth outstripping wage rises.

Prudential Regulation Authority (PRA) rules state that mortgages with an LTI of more than 4.5 can’t make up more than 15% of lenders’ overall new loans.

But it appears that within the portion of higher LTI loans, lenders are willing to offer relatively higher value loans.

At least one provider is now offering a limited amount of lending at up to six times income at up to 85% loan to value (LTV), according to reports from brokers.

It comes as the average LTI to first-time buyers reached 3.64 in November last year, up from 3.54 a year earlier, according to the latest UK Finance data.

Home movers’ typical LTI has jumped to 3.41 from 3.27, over the same time period.

Mark Harris, chief executive of SPF Private Clients, said: “It is not surprising that higher income multiples are on the rise given that the long-term trend for property prices is upwards and with salaries failing to keep pace.

“Furthermore, with rates still at historic lows, borrowers maybe tempted to borrow more to take advantage of cheap rates.”

Andrew Montlake, director at broker Coreco, added: “I think lenders are becoming more comfortable with the way they assess affordability and so income multiples as such are becoming less important, however many are still uncomfortable going over 4.5 or 5 times income.

“With the 15% rule still in place it does not look like there will be any fundamental changes to this any time soon.”

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