Loan to income changes could shut first-time buyers out of 95 per cent market – analysis

The recent tightening of loan to income (LTI) multiples on high loan to value (LTV) products could end up blocking first-time buyers from the property market, brokers have cautioned.

The long-awaited return of more low deposit mortgages has coincided with LTI changes. This includes Halifax, Virgin Money and Platform restricting income multiples for the self-employed, those using Help to Buy, those earning less than £30,000 or those borrowing above 75 per cent LTV.  

At the same time, Accord, Barclays and Ipswich Building Society have all loosened maximum LTIs for borrowers with incomes above £60,000 by allowing them to borrow as much as 5.5 times their income.  

First-time buyer and self-employed shut-out  

Coupled with higher rates at upper LTV bands, Adrian Anderson, director of Anderson Harris said tightened LTIs could mean the mortgage market would not recover some of the business lost from first-time buyers last year.  

Data from Reallymoving showed the first-time buyer market contracted by 12 per cent last year as home movers and investors took a share of business activity while taking advantage of the stamp duty holiday.  

He said: “It will feel like they’re continuing to be punished. Those already on the ladder have likely benefitted from an increase in capital anyway, so maybe their income multiples don’t need to be so high.  

“For people trying to get onto the ladder and find a place they would like to live in, they will be in a position where even if they have a good income or two decent incomes, the increases in house prices mean they will still be paying a higher rate than someone who’s already on the ladder.”  

Anderson also said the volatility of self-employed incomes would make the process more “challenging”.  

“With some lenders it’s so critical how your last three of months trading went. You might have some self-employed applicants whose turnover is quite lumpy.  

“Quite often, when it comes to submitting applications for self-employed clients a lot of it comes down to the timing and whether they’ve had a good three months. If income multiples are lower and more questions are asked, it will be difficult for them,” he added.  

For the full article – https://www.mortgagesolutions.co.uk/news/2021/03/11/loan-to-income-changes-could-shut-first-time-buyers-out-of-95-per-cent-market-analysis/?cmpredirect

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