“GREAT news” is how one broker has described another lender — Gen H — announcing it has increased its loan-to-income (LTI) limits today.
Effective immediately, self-employed applicants at Gen H can now borrow up to 5.5 times their income, while loans over 85% LTV will no longer be limited to 4.49 times applicant income. Additionally, the threshold for the gross income-based 4.49x LTI cap will be reduced from £50k to £40k.
On the back of these changes, the lender says it can now support up to 12% more affordability-constrained first-time buyers and movers with mortgages.
Pete Dockar, Gen H Chief Commercial Officer, said: “I’m delighted to announce these positive changes to our loan-to-income multiples policy today. Increasing our LTI limits for self-employed applicants, those with small deposits, and those on average household incomes will allow us to support exactly the people we wish to reach.
“These buyers are often underserved by existing mortgage products and the high street, so I hope the implementation of these new rules makes our stance very clear: we’ll take every chance we get to create more incremental homeowners.”
Not another Northern Rock
Brokers welcomed the news and said that the more lenders who do this, the less risk there is to the financial system. Justin Moy, Managing Director at EHF Mortgages, said: “It’s great news to see Gen H join a number of high street lenders and smaller building societies who want to support homemovers and first-time buyers in particular. An extended affordability policy is quickly becoming the ‘norm’ among lenders.
“But it’s good that lenders are sharing the load, and therefore spreading the risk, as this stops fire sales and ensures that there is enough opportunity without causing another Northern Rock fiasco.”
Stephen Perkins, Managing Director at Yellow Brick Mortgages, also welcomed the move but sounded a note of caution: “As widely expected, many lenders now want to take advantage of being able to offer more than 4.5x income and no longer having to limit this to under 15% of their lending.
“This will help many borrowers achieve their goals, but it’s vital that they fully consider the monthly payments and don’t over-stretch themselves in the event that interest rates increase again in the future.”
Elliott Culley, Director at Switch Mortgage Finance, took a similar stance: “As house prices continue to increase and borrowers are hit by increasing other costs, mortgage lenders offering higher borrowing amounts will certainly help. However, borrowers need to be careful not to overstretch themselves and robust conversations are needed with their broker to ensure they do not overextend.”
“Good to see Gen H enter the fray”
Ben Perks, Managing Director at Orchard Financial Advisers, said the changes are especially welcome in the current economic environment: “The National Insurance hikes imposed by the government are likely to hinder wage growth, and pay rises will be few and far between. Increasing LTI ratios is the only tangible way to help people purchase property. It’s good to see Gen H enter the fray.”
Emma Jones, Managing Director at Whenthebanksaysno.co.uk, was also upbeat but said borrowers need to go into these loans “eyes wide open”: “In recent weeks we’ve seen a growing number of lenders tweak their criteria so that they can lend more, following the relaxation of the rules. The changes might seem small on the surface but they can make a big difference for many borrowers, helping them to get that important first step on the ladder. As ever, speak to a broker to ensure you’re not over-extending and go into the mortgage eyes wide open.”
Photo by Kevin Dunlap on Unsplash
