Thisismoney Head to Head - high LTIs

Ever since the FCA relaxed its stress test rules lenders have been innovating in this space.

Historically our forefathers were limited to 3x income multiple but now we are seeing 5.5 and 6 x.

Whilst these high multiples are not ideal for the masses, they do have a place in the lenders toolbox for some.

Extended multiples for higher earners seem logical as for most their monthly fixed living costs begin to represent a smaller percentage of the take home salaries as that figure rises meaning more disposable income to service a higher level of borrowing.

This is the reason why multiples of 6x are reserved for high earners or for certain professions where salary increments are likely to be large and frequent eg Doctors

Ultimately the Clients need to work out a realistic and sustainable budget without affecting lifestyle. This budget should include costs for mortgage protection payments and other essential insurances.

With the price of rents in London and the south east, lenders need to be offering high loan-to-income mortgages as an alternative to giving your cash to landlords. Many renters can afford high LTI mortgages, but few options on the table mean they often don't fit the criteria. As this market opens up, younger people will be given the dream of owning their own home and with rates where they currently are, it looks like these will become more affordable in the future when rates taper down.

High LTIs aren't reckless, they're realistic. Wages haven't kept pace with prices for over a decade, and in London and the South East plenty of renters could comfortably service a mortgage but can't pass a 4.5x cap. Handing £1,800 a month to a landlord but being told you can't borrow the same amount makes little sense.
Products like Leeds' 5.5x or 6x have a place for higher earners and professions with strong income growth, doctors being the obvious example. Used properly, with a proper budget covering protection and bills, they open doors. Used lazily, they stretch people thin. The tool isn't the problem, the advice around it is.