Building society bosses went to Downing Street today to gain government support to loosen lending rules to help more first-time buyers.
CEOs from Skipton, Yorkshire and Nationwide building societies want to increase the limit on the number of mortgages they can provide at 4.5 times a borrower’s income.
As it stands, most lenders will issue mortgages to customers if the loan for which they are applying is no more than 4.5 times their income.
At present the rules allow lenders to increase this income multiple to accommodate more borrowers. However, those borrowing at higher loan-to-income ratios must only account for 15% of a lenders’ books.
Because of difficulties with affordability for buyers, due to higher mortgage rates and increased house prices, building societies feel this is restrictive and want this limit raised to 20% so they can help more people take out mortgages.
Indeed, they said increasing the limit would allow lenders to responsibly support even more first-time buyers, helping more people have a home.
Currently 35% of first-time buyers are supported by the building society sector.
Skipton Building society thinks increasing it to 20% would be a ’modest but impactful change’ that would ‘deliver meaningful societal benefits by enabling more first-time buyers to access the housing market’.
It thinks it would also help stimulate economic growth and support the government’s ambition to deliver 1.5 million new homes.
Today, Stuart Haire, chief executive of Skipton Group and other representatives from across the mutual and co-operative sector were heading to Downing Street to raise these points.
Charlotte Harrison, CEO of Homes at Skipton said it was making other changes to its products to help improve access to homeownership.
“At Skipton, we continue to recognise the growing affordability challenges facing first-time buyers.
“Adjusting stress rates alone isn’t always enough, as many would-be buyers are still impacted by the limitations the Loan to Income (LTI) cap place on our lending. That’s why we’re taking a more comprehensive approach by revising both, while remaining within the current cap.
“And as a result of the changes we’ve made, loan sizes could increase by up to £45,000 (+16%) for a typical household earning £60k.
“We continue to support calls for a review of the LTI flow limit. In the meantime, as part of our commitment to supporting more first-time buyers, we’re making changes to the stress rate, lowering the income requirement to access larger loans, whilst increasing our LTI policy at 95% LTV.”
