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Income multiples

Journalist: Anna Sagar, Mortgage Solutions / Specialist Lending Solutions

ended 16. February 2023

Interested in getting brokers' views on income multiples following the move from Santander recently increasing their LTI limits at certain LTVs/incomes. 

  1. Will more lenders follow suit and increase their LTI limits? 
  2. What is the lay of the land with LTI limits currently? Do you think they are fit for purpose? 
  3. From regulatory perspective, lenders can't lend more than 15 per cent of their total mortgage book at more than 4.5 times their annual income. Do you think lenders will hit that ceiling faster? Do you think it should be repealed?

6 responses from the Newspage community

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Justin Moy
Managing Director at EHF Mortgages
We have to be careful with increasing LTI limits whilst rates are still relatively high, and I am sure other lenders will be curious to see how much extra any given client could borrow where lenders ahve relaxed their calculators. There will be plenty of borrowers looking to consolidate other debts, or have had some changes to income since their original mortgage advance, so may genuinely benefit in the short term, but the longer term impact of increased borrowing needs education too. This may be where the relatively free access to car finance and credit cards are curtailed?
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Luke Thompson
Director at PAB Wealth Management
This is a fairly common practice within the mortgage market. At the end of last year most lenders reduced their LTI's as they wanted to assess the impact of the rises in the cost of living on customers especially in the face of fast rising interest rates. Now that they have had more time to assess the situation and with the recent rate reductions lenders would appear to be more confident and with this means the potential for LTI's to move closer towards what we had seen in the past.

It is important to note though that to benefit from these higher LTI limits you will often need to be putting down a larger deposit and have a higher income which will mean a lot of applicants do not actually qualify.
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Graham Cox
Director at Bridging Hub
The LTI limits are fine in my opinion. We really need to get away from this extend and pretend mentality, where house prices are propped up with longer maximium terms and more lenient lending limits.

They are making the housing crisis worse by trying to fix the symptom rather than the underlying problem, namely that house prices are too high, and out of all proportion to average earnings.
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Scott Taylor-Barr
Principal Adviser at Barnsdale Financial Management
I always find it interesting that the regulator deemed that income multiples were a blunt and inaccurate tool for assessing someone's mortgage limits, so forced the entire mortgage market to move to affordability modeling. Then they decided that some of these affordability models were producing too high loan amounts so capped lenders by introducing a maximum income multiple; albeit given a fancy new name as an LTI limit. Santander's move is of course welcomed, anything that allows people to continue to make their dreams a reality is going to be and Santander is a large enough lender that this may well have a ripple effect and see other lenders at the very least reviewing this area of their criteria, even if they don't ultimately follow suit.
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Gary Boakes
Director at Verve Financial
With rates as low as the lenders can do at the moment, then criteria and LTI are always going to be the next thing the lenders change to gain business. This is going to be a common trend over the next 6 months as lenders fight for business. I fully expect leaders to follow suit with the LTIs and with changing criteria- interest only probably going to be the big one this year.
The problem is at the moment that the average house price to the average income in the UK is still 7x, so something dies need to change long term, but 5x income is going to help buyers bridge this huge gap.
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Dean Esnard
Director at Magni Finance
As large loan brokers, we regularly assist clients with 5.5x income mortgages. In the last year, we have seen more high-street lenders enter this market. Although their criteria differ in terms of the required income and loan-to-value, Barclays, Santander, HSBC, Accord, Nationwide and NatWest now offer some form of 5.5x income to higher earners. Most of these lenders also have specialist large loan teams with more experienced underwriters to deal with the growing number of larger mortgages mainly in London and the South East.