The UK mortgage market is experiencing a significant shift as the number of lenders offering a loan-to-income (LTI) ratio of six times or more has quadrupled. This change follows the Financial Policy Committee’s (FPC) decision to ease restrictions on high-LTI lending, allowing more borrowers to access larger loans.
What prompted this change in the mortgage market?
The FPC’s relaxation of the high-LTI flow limit has been a game-changer for the mortgage market. With several lenders increasing their maximum LTI multiple, major banks have all crossed the six times threshold in the past year. This adjustment reflects a growing recognition of the financial realities faced by borrowers, who often require larger loans to secure properties.
How does this impact borrowers?
Despite the increase in lenders offering higher LTI ratios, the average borrower income has only risen slightly. The average LTI sought has increased, with requests for five times or more also rising. While the average maximum loan offered has increased, a significant portion of borrowers still struggle to find lenders willing to accommodate six times LTI, although this is an improvement from the previous year.
What this means for brokers and investors
This shift in the mortgage market presents both opportunities and challenges for brokers and investors. With more lenders willing to offer higher LTI ratios, brokers can better serve clients who need larger loans. However, the ongoing difficulty for a majority of borrowers in securing these loans highlights the importance of thorough eligibility assessments and tailored advice.
Frequently asked questions
What is the significance of the six times LTI ratio?
The six times LTI ratio allows borrowers to access larger loans, which can be important for purchasing homes in a competitive market, particularly in high-cost areas.
How can borrowers improve their chances of securing a higher LTI?
Borrowers can enhance their chances by maintaining a strong credit profile, demonstrating stable income, and seeking advice from mortgage brokers who understand lender criteria.