Mortgage industry calls for end to lending constraints

July 13, 2016 by Brendan O'Neill

Lenders

Loan to income criteria should be reviewed, according to the Council of Mortgage Lenders chairman, Peter Hill.

According to Hill, who is also the Leeds Building Society chief executive, the mortgage market has altered since 2014, when the Financial Policy Committee from the Bank of England had introduced constraints on loans according to income levels. The measures had been introduced in reaction to rapidly increasing house prices. However, the chairman believes that the restrictions should be lifted following the Brexit vote.

Hill states that in comparison with the affordability checks which were introduced as part of the Mortgage https://www.beaconfinancialtraining.co.uk/wp-content/uploads/2020/06/cemap-online-and-classroom-training-uk.jpget Review in April 2014, the loan to income criteria is an “old fashioned and very blunt instrument.”

To demonstrate his point, he cited an example where two people had the same level of income, but one had much higher expenditure than the other. However, the two people would be able to borrow the same amount based on loan to income criteria.

Hill suggests that although the measures were appropriate at the time they were introduced, they now need to be reviewed, as the criteria is no longer a valid measure of affordability. When the Financial Policy Committee introduced the limit, it was decided that lending which was over 4.5 times the applicant’s income would be restricted below 15% of a lenders total lending. According to Hill, most lenders maintain a level below this limit.

CeMAP courses are provided to ensure that mortgage advisers are aware of all the legislative changes and mortgage industry rules, before assisting a customer looking for a mortgage.