Consequently, the percentage of a borrower’s salary spent on mortgage repayments increased from 37% to 39% month-on-month, despite an increase in wages and a fall in mortgage rates.
The analysis was carried out by Stonebridge for its May Mortgage Affordability Index, which combines official wage and mortgage rate statistics with its own mortgage transaction data to determine the relative affordability of mortgage finance in proportion to the average borrower’s earnings.
Rob Clifford (pictured), chief executive of the network, said the loosening of loan limit criteria and borrowers’ renewed appetite for higher-value mortgages created opportunities for brokers to revisit their customer bank and pipeline cases.
Earlier this month, the Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA) confirmed that lenders would be allowed to surpass the 15% loan-to-income (LTI) limit with immediate effect by making an application to do so.
Since then, a number of lenders have made changes to their LTI criteria and stress rates to allow households to borrow more.
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Lloyds Banking Group said an extra £4bn of lending would be made available to first-time buyers across its brands, due to changes.
The lender said this could boost borrowing by 22%, and someone with a household income of £50,000 and a 10% deposit could increase their loan from around £224,500 to £275,000.
Clifford said: “Mortgage sizes jumped significantly in May as borrowers took advantage of lending criteria changes from several high street lenders.
“The big question now is whether this marks a temporary uptick in borrowing and cost or a more lasting shift in how much borrowers are prepared to take on.”
Door opens for conversations
Clifford said if it was the latter, the mortgage market could be entering a phase where higher borrowing levels become the norm.
He added: “With more lenders raising LTI caps and easing affordability rules, brokers are seeing renewed momentum in the market, particularly among higher earners and professionals, who now qualify for larger loans.
“That’s opening the door for conversations with customers who may have held back earlier in the year. This is a real opportunity for brokers to re-engage, revisit pipeline cases and add value by helping customers understand what’s now possible.”
