The Bank of England announced that they were relaxing the rules around high loan-to-income (LTI) mortgage lending. This is great news for buyers who could now gain a larger mortgage enabling them to afford a more expensive property. With property prices increasing across the UK this a welcome change.
Previously, lenders had to report LTI ratios by individual quarter however the recent changes mean lenders are now able to monitor and report their LTI ratios quarterly on a rolling 12 month basis.
The first to take advantage of this change is Leeds Building Society who will now potentially lend up to 4.75 times loan to income (up from 4.5), to those wanting to move home or re-mortgage at up to 85% loan to value. Applicants will be stress tested to ensure they can afford their mortgage now and in the future should interest rates increase. In addition to helping buyers afford their dream home, the mortgage industry believes this change will allow lenders to have more flexibility and be able to better cope with fluctuations in business volumes.
Greg May, Director at Romans explains: “We predict that Leeds Building Society will be the first of many to increase their LTI ratio and feel this is a benefit not only for lenders but also borrowers who may need a financial boost to help bridge the gap between their earnings and property prices in their local area.
The Bank of England’s changes were welcomed by mortgage brokers, many of whom found the fixed system inflexible. In order to avoid accidentally exceeding the fixed limit, many scaled back lending at higher LTI’s to avoid penalisation.”
At the moment Leeds Building Society are only offering this new rate to borrowers who already have a mortgage and can demonstrate the ability to keep up with the monthly payments. A statement from Leeds Building Society indicated that they will continue to lend responsibility and assess all mortgage applications based on affordability.
If you would like to find out more about these changes or would like some expert mortgage advice, contact Greg and his team on 0118 3219 536.
Your home may be repossessed if you do not keep up repayments on your mortgage.
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