High-LTI lending more than doubles in 12 months
The number of first-time buyers borrowing at least 5.5 times income has more than doubled in the year since regulators amended loan-to-income (LTI) lending rules, a mortgage network has revealed.
The number of first-time buyer home loans in the top LTI bracket increased by 142% to 7,621 in the year to the end of June, the first full year since lenders could issue more high-LTI mortgages.
The Financial Conduct Authority (FCA) data obtained by Stonebridge under a Freedom of Information Act request demonstrates how powerful the regulators’ intervention has been, says the network, and illustrates the changing shape of the lending market for advisers charged with helping first-time buyers get on the ladder.
Analysing the LTI bands in more detail, the figures reveal that first-time buyer lending between 4.5 times and 5.5 times income has risen 36% to 48,839 in the 12 months since the rule change, while combined high-LTI lending to first-time buyers of at least 4.5 times income climbed 45% year-on-year to 56,460.
The Prudential Regulation Authority (PRA) and FCA invited lenders to apply for permission to exceed the LTI flow limit in July last year under proposed rule changes that became permanent last month.
The LTI flow limit had been used to cap the number of loans that individual lenders could make at over 4.5 times income to 15%, but this has been changed to apply industry-wide.
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The data also revealed that other borrowers are taking advantage of the new regime.
The number of non-first-time buyer mortgages at LTI ratios over 4.5 rose 56.6% annually to 58,835. Those between 4.5 and 5.5 times jumped 64.3% to 49,936, while those above 5.5 increased 24.1% to 8,899.
Rob Clifford, chief executive at Stonebridge, said: “High LTIs don’t necessarily increase risk to lenders or borrowers, so these changes last year were roundly welcomed. They create more options for borrowers, wider freedom for lenders and a more fluid mortgage market that better serves everyone concerned.”
