Under new guidance from the main committee in England, large lenders will be able to limit larger mortgages in the current 15% loan-to-income ratio limit.
Financial Policy Committee said: “Personal lenders [should be allowed] To increase its share of loans on such a high LTI, while also aiming to ensure that the total flow and limit remain at a limit of 15%. ”
Since 2014, previous FPC guidelines have ruled that large lenders should not exceed 4.5 times the borrower’s income in overall new residential mortgages.
In fact, this sees lenders limit this type of loan below this level. This puts some larger lenders well below this level, while others have to reduce such loans to remain in guidance.
However, regulators are under pressure to raise this hat to allow more home loans to be written, especially for first-time home buyers.
Nationwide, Skipton Building Society and UK Finance are one of many larger lenders and institutions that have campaigned to increase LTI restrictions to around 20%.
Although Labor calls on supervisors to relax a range of city regulations to boost its growth agenda.
The FPC – including Bank of England Governor Andrew Bailey and Financial Conduct Authority CEO Nikhil Rathi – released new guidance to the Prudential Regulatory Authority and the FCA.
The FPC added: “The FPC recognizes that in doing so, a single lender’s LTI loan could exceed 15% of its total number of new residential mortgages, while the total flow remains consistent with the limit of 15%.
“The total flow is calculated based on the lender’s expanded new residential mortgages that have expanded over £150 million a year.”
Both BOE and FCA expressed concerns about lifting the restrictions.
Bailey and Rathi noted in a separate Finance Committee hearing that such a move would increase the risk from about 1,000 (historic figures) in the quarter.
They added that lifting this restriction, without a significant increase in housing construction, would lead to higher housing prices.
The regulator’s move will take effect on July 11 and raise the previous threshold from £100 million, which is also in place since 2014.
