The UK mortgage market is experiencing a significant shift as the number of lenders offering six times loan-to-income (LTI) multiples has quadrupled. This change follows a relaxation by the Financial Policy Committee (FPC) regarding LTI flow limits for individual lenders, allowing more borrowers to access higher loans.
What Led to the Increase in LTI Offers?
The FPC’s recent decision to ease restrictions on LTI flow limits has prompted 18 lenders to raise their maximum LTI multiples. Major banks such as Barclays, NatWest, HSBC, Nationwide, and Leeds Building Society have all crossed the six times threshold in the past year, reflecting a growing willingness among lenders to accommodate higher borrowing needs.
How Does This Affect Borrowers?
While the average borrower income has only marginally increased, the average LTI sought has risen from 3.8 times to four times. The proportion of cases requesting five times LTI or above has also grown from 11% to 15%. However, despite this progress, 61% of borrowers specifically seeking six times LTI still cannot find an eligible lender, although this figure has decreased from 86% a year ago.
What This Means for the Mortgage Market
The increase in lenders offering higher LTI multiples signals a shift in the mortgage market, aligning more closely with the reality of borrowers’ needs. As the average maximum loan offered via MBT has risen from £270,000 to £330,000, the proportion of cases with no affordable or eligible lender has decreased from 14% to 9%. This indicates a more accessible market for those needing larger loans.
Frequently asked questions
What is the significance of the six times LTI offer?
The six times LTI offer allows borrowers to secure larger loans, which can be important for purchasing homes in a rising market.
Are there still challenges for borrowers seeking high LTI?
Yes, despite more lenders offering higher LTI, a significant percentage of borrowers still face challenges in finding eligible lenders.