Relaxing LTI rules: Is the ladder truly in reach or are FTBs now leveraged to infinity? – Beavis

Unusually, it also introduced an immediate ‘modification by consent’ – a concession that lets lenders disapply the existing limits if they ask nicely and ask first, while the regulator stirs up its next policy concoction.

More LTI flexibility means lenders can offer bigger mortgages without breaching the 15% ‘flow limit’. Based on those who’ve already been given the nod – including Lloyds Banking Group, Skipton, Nationwide, and Yorkshire – this could unlock 15-25% more borrowing power for first-time buyers, worth an extra £4bn per year from LBG alone.

Crucially, the PRA’s review will now sit within the FCA’s wider consultation on mortgage lending. A welcome move, helping avoid the regulatory overlay we’ve seen before, when one rule lands clumsily on top of another. Anyone remember Consumer Duty?

So good news, right?

Well, yes. Higher LTI ratios mean more would-be buyers can stretch their affordability tippy toes a little further to reach that first rung on the property ladder. This gets people moving, builds security, and opens the door to the longer-term benefits of homeownership. That’s undeniably positive.

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And yet, despite personally calling for this change for years, it’s hard not to wonder whether lowering the ladder is, in reality, just making it longer.

I made a list of all the first-time buyer propositions I’ve worked on or with in some form over the years, whether in mortgage distribution or lending. It’s a long one: Help to Buy, shared ownership, 40-year terms, 95% LTV, joint borrower sole proprietor (JBSP), guarantor mortgages, private equity schemes, lower stress rates, LTI ratios, new-build incentives, long term fixed rates, gifted deposits, Lifetime ISAs, family mortgages… I’ve even explored using pension pots to boost deposits.

Don’t get me wrong. I stand by each of these and so should anyone else in our industry who has fought to develop these ideas. Each will have helped someone, somewhere. But step back from the wood and look at the forest, and the pattern becomes hard to ignore.

Consider the pandemic ‘stamp duty holiday’. Designed to support the market and ease costs for buyers, it ended up pushing house prices up by 13-14%, far outweighing the modest 1-2.5% marginal rate tax saving. The result? Greater inequality, lower affordability, and a longer-term headache. We’ve seen similar dynamics with electric vehicle (EV) subsidies and student loans – schemes intended to widen access that end up inflating prices.

Many of our first-time buyer innovations do the same. Whether by enabling buyers to borrow more or funnelling wealth from parents and pensions, we’re mostly doing two things: increasing mortgage debt and driving up house prices. That can’t go on.

To be clear, I’m not criticising the initiatives themselves – many have cost me years of energy, passion, and effort. But I worry our collective focus on demand-side solutions is letting the supply side off the hook.

Until we tackle the chronic shortage of homes, all the ingenuity in the world won’t be enough. Demand-side innovation has its place, but it can’t solve a supply-side problem. For every new workaround that helps lower the ladder, we risk adding further rungs to the top, pushing the problem away from first-time buyers and on to the next generation of retirees.

Maybe it’s time we spent as much energy building homes as we do building ways around the fact we haven’t.