The firm has analysed tens of thousands of mortgage enquiries for first-time buyers that have been processed through its research platform, MBT Affordability.
More than half of first-time buyers have asked for a loan size where the LTI is above 4.5, and 58 per cent of cases were considered to be affordable.
The majority of these applicants were also able to demonstrate the affordability required to borrow a loan size at least 10 per cent larger than the loan they had requested, MBT found.
The Bank of England introduced a cap on the number of mortgages lenders can be extended at an LTI of more than 4.5 as part of a response to make borrowing rules more stringent after the financial crisis.
No more than 15 per cent of a lender’s new mortgages are allowed to be at a rate of 4.5 LTI and above.
In August, the regulator dropped a rule introduced at the same time which meant mortgage applications were subject to a mandatory three per cent stress test. The LTI flow limit was not reviewed.
‘Removal of cap…makes ownership more accessible’
Tanya Toumadj, chief executive at Mortgage Broker Tools (pictured), said: “The plight of first-time buyers has been well-publicised, with continued house price inflation over recent years making it harder for hopeful homeowners to save a deposit and demonstrate affordability.
“Lenders are increasingly taking a data-driven approach to assessing affordability and the recent removal of the mandatory three per cent stress test, will give them some room to innovate and develop new products that could help first-time buyers and home movers.
“Our data shows that the removal of the LTI flow cap that is currently imposed on lenders is one option that could make home ownership more accessible to first-time buyers, many of whom are otherwise able to demonstrate good affordability.
“There is clearly a lot of demand for this approach from customers.”
However, Toumadj said simply removing the LTI flow limit may not be the right option, particularly in the current environment.
She added “Mortgage affordability is a complex balancing act that needs to consider multiple factors to deliver an outcome that remains robust and responsible without unduly restricting customer options. This approach requires data and at MBT, we are already working with lenders to help them take a more data-driven approach to mortgage affordability.”
