Talks take place to raise the loan-to-income (LTI) ratio

The Association of Mortgage Intermediaries’ (AMI) chief executive has been speaking to the Bank of England about the current LTI ratio and the need for it to increase.

The ratio is currently capped at 15%, and the talks centred around increasing it to 20% of the lenders’ total loan book that can be approved at over 4.5 times the income of those approaching them for mortgage borrowing.

Chief executive Robert Sinclair was in Manchester speaking at the Financial Services Expo, when he revealed that it was those desperate to get onto the property ladder in the North of the country who were being hit the hardest.

He stated that although house prices were generally lower in most northern cities, they were still considerably higher in places such as Manchester, Birmingham and Leeds. The residents of these cities often have lower take-home pay, meaning that without the ability to secure a mortgage with a higher loan-to-value ratio, they are unable to take that step onto the property ladder.

June 2014 saw the Financial Policy Committee (FPC) introduce a cap towards the end of 2014, and saw the bigger lenders place the cap on all mainstream lending, without utilising the 15% allowance for higher LTIs. This has placed additional pressure on all other lenders to service the mortgage market, which could signal an end to higher LTI lending.

As a mortgage advisor you will have undertaken your CeMAP training, passed the exam and be able to assess your customers’ affordability before giving advice on how much can be borrowed and the costs to repay.



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