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.
“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.
