According to a poll carried out by Mortgage Solutions, 42% of readers say that tightening on lending above 4.5 times income has had a ‘somewhat significant’ impact on their customers. A further 27% believe the effect has been ‘very significant’, while 31% say the changes have not impacted their customers at all.
In October last year, the government amended the rules for Loan To Income ratios (LTIs) by constraining new lending at or above 4.5 to no more than 15% of an institution’s new mortgage loans.
Martin Stewart, managing director at London Money said he was witnessing a more positive attitude towards affordability among lenders in recent weeks.
“I’ve generally been down-selling the opportunities and telling clients how tough the current market is. But then we put the income figures into lenders’ affordability calculators and we’re quite surprised by what’s coming back.
“My personal experience is that we’re experiencing a degree of positivity from the lenders at the moment. This might be because we’re in the last quarter and firms are desperate to hit targets but we’ve had a lot of cases that have been stuck and are suddenly freeing up now. There are still problems in the market, but I’m not seeing it necessarily on an affordability basis,” Stewart added.
Senior mortgage and protection consultant at Start Mortgages, Emma Garrett, said lenders were introducing slight criteria changes to get around LTI caps.
“For example, Natwest and Nationwide will now consider 100% of commission as long as you can prove it over three or six months. Skipton will also consider the same if you have a P60 from last year. Whereas before lenders might have only considered half of that commission, they’re tweaking things slightly to make it fit,” she said.
However, Garrett added that the LTI caps were affecting all types of borrowers, in particular those looking to purchase or remortgage in London and the South East.
“First-time buyers are definitely being affected in my area, not because people want to borrow five times income because they’re irresponsible, but because the South East is so expensive that they’re having to borrow the maximum that they can,” she said.
“Remortgagors are also being hit. Say for example, you’ve been on a variable rate for the last five years because it’s been so good and now you’re thinking that you need to get onto a fix. Those people might have had lenders that offered them five times income in the past but that’s not the case anymore.”