Halifax will tomorrow change some of the loan-to-income (LTI) limits applied to its affordability calculations.
Where income is above £75,000 per annum and the loan-to-value (LTV) is below 75%, for loans up to £1m, the max LTI is being increased from five times to 5.5 times salary.
Rob Gill, managing director at Altura Mortgage Finance, said: “There has been a lot of focus on how increases in taxes, utility bills and the cost of living in general might be taken into account by lenders and impact affordability for mortgage borrowers.
“In truth, however, what lenders are taking away with one hand they are giving back with the other in the form of increased income multiples, with Halifax being the latest in a number of lenders to do so recently.”
Lewis Shaw, founder of Shaw Financial Services, commented: “Whilst this may seem significant for those earning over £75k, who want to borrow 5.5 times their income, I’m not sure they’re the ones who need the most help.
“The last thing we need at the moment is the ability of borrowers to push prices even further upwards with higher loan-to-income multiples. The knock-on effect could further alienate and price out first-time buyers who are already stretched to breaking point if prices rise with the availability of more credit. Not to mention that affordability for people earning less than £40k has been reduced in the same breath.
“When will people realise that rising house prices make everyone poorer, not better off?”
Comments (4)
I love Smile’s comment –
On the same theme I just questioned the soundness if Proportunity who just had a $150M raise for their big fintech idea, provide extra top up loan for borrowers already out of their depth – Curious, Halifax just announced a 5.5 times multiplier, is Proportunity model not based on buyers being unable to afford property as their multiples do not stretch enough? So they get a further LOAN.
Separately, in the UK, where an end terrace in Newcastle is 50k, are we saying buyers would need this solution? In fact it could be argued that by helping borrowers to buy properties they can not normally afford, they are both creating house price inflation (scarcity of stock as these buyers would not normally be in the ecosytem – which causes prices to rise) and if there is a correction in values – as seems imminent, making these buyers at risk of having a bigger debt than the house value – negative equity.BoE is talking loud and clear about interest rate moving up from 0.1%, so any fintech solution around the property asset and the cost of borrowing may well be in for a difficult time. Zillow in US has stopped its ibuyer model also – maybe it feels the market is about to go retro?
I like what Shaw has to say.
He is the type of commentator PIE should be attracting not the likes or Quirk and Smith.
The mortgage market review was designed to be critical of over borrowing and nothing to do with property prices.
If you have saved 25% then the lender is relatively safe and the client has demonstrated an ability to manage money. it is likely to exclude those who have had a “gift”.
What was the point of the mortgage market review??
In order to control property price inflation they need to make mortgage criteria stricter.
If there are not enough buyers at a given price bracket then the property market price has to adjust accordingly.