Mortgage News
Increase LTI cap or first-time buyers will suffer – BSA
First-time buyers will suffer if smaller lenders are not given greater freedom to lend above four-and-a-half times borrowers’ income, warned the Building Societies Association (BSA).
In its response to the Prudential Regulation Authority’s (PRA) consultation on Loan-to-Income caps, the BSA wants lenders who advance mortgages of between £100m to £500m to be given a larger allowance.
In June’s presentation of the Financial Stability Report Mark Carney announced a cap on high LTI lending whereby lenders could offer no more than 15% of their new loan book at income multiples of four-and-a-half times or more.
Currently, the restriction will apply to any lender which advances more than £100m of gross mortgage lending, which the BSA has argued will penalise fledgling buyers.
It has recommended that lenders which fall within its proposed bracket of £100m to £500m of annual gross mortgage lending should have a higher LTI limit based on a fixed number of loans.
Robin Fieth, chief executive of the BSA, said: “This is the first time that macro-prudential tools have been used to control the housing market and the actual effects are an unknown quantity.
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“Of course, affordability is crucial and banks and building societies should only lend what a customer can reasonably repay, however, our concern is the effect these measures will have on first-time buyers in and around the capital.”
The BSA also wants the PRA to consider adding an 18-month time limit on the use of the cap to give the Financial Policy Committee the opportunity to assess the impact of the measure.