BROKERS have been mixed in their reaction to Barclays today increasing its maximum residential LTI (loan-to-income) multiple from 5.5x to 6x gross annual income. Though some welcomed the move, a policy more and more lenders are adopting, they said just because you can borrow more doesn’t mean you should, especially in the current climate.
To be eligible for the enhanced 6x income multiple, Barclays says borrowers must have a combined joint income of £75,000 or higher (basic salary, sustainable allowances, and/or self-employed income), a mortgage structured on a fully capital and interest (repayment) basis and a maximum loan-to-value (LTV) of 85%.
Shaun Sturgess, Director at Swansea-based Sturgess Mortgage Solutions, said: “On the surface, Barclays pushing to 6x income looks like welcome news for borrowers struggling with affordability. But people should beware of stretching further at a time when household budgets are already under pressure and the wider cost-of-living picture hasn’t improved.
“I’ve seen first-hand what happens when lenders over-extend: mortgages look affordable on completion day, then become unmanageable the moment circumstances shift. Yes, more higher loan-to-income loans might stimulate activity in the short term, but long term it risks fuelling price inflation and increasing financial vulnerability for buyers.
“Just because you can borrow 6x income doesn’t mean you should. Sustainability matters more than the headline figure.”
Dariusz Karpowicz, Director at Doncaster-based Albion Financial Advice, shared much the same view: “Six times income sounds brilliant until you realise you’re eating beans on toast for the next 25 years. Barclays now offers 6x borrowing, but banks calculate what you can borrow, not what you should.”
Karpowicz urged people to do the maths or, if not, to get a broker to do it for them: “Before celebrating, grab your calculator. Your mortgage payment shouldn’t exceed 30% of take home pay. Add council tax, utilities, insurance and maintenance for the full picture.
“The £75,000 minimum income targets higher earners, but even they need breathing room. Interest rates could rise, your boiler might fail, your car could need replacing.
“Build these scenarios into your planning. Just because the bank offers more rope in the form of a higher loan-to-income doesn’t mean you should use it all.”
Katy Eatenton, Mortgage & Protection Specialist at St Albans-based Lifetime Wealth Management, said the increased loan-to-income is great news but again advised caution: “It’s great news that lenders are still trying to keep the market moving by increasing affordability, but with bigger loans comes more risk.
“This is especially the case in the current climate, with more potential tax hikes to come and consumers already feeling the squeeze due to stubbornly high inflation.”
Emma Jones, Managing Director at Runcorn-based Whenthebanksaysno.co.uk, said: “Lenders are doing their utmost to get the market moving at present. Transaction levels have been muted in the run-up to the Budget, understandably so given the noises emerging from Number 11.
“But just because you can borrow 6x doesn’t mean you should, so always seek advice from a broker.”
Patricia McGirr, Founder at Burnley-based Repossession Rescue Network, said: “Stretching borrowers further in a fragile cost‑of‑living climate risks creating vulnerability rather than security. True affordability isn’t just about bigger multiples, it’s about sustainable lending that protects households when circumstances change.
“Assisting buyers must go hand‑in‑hand with prudence, otherwise today’s opportunity becomes tomorrow’s repossession story.”
But Aaron Strutt, Product and Communications Director at London-based Trinity Financial, was upbeat: “Barclays is the latest big bank to start offering income stretch mortgages now that the regulator has relaxed the lending rules. Six times salary used to be viewed as a pretty huge income stretch but now so many lenders are offering 5.5 or six times single or joint salary mortgages it is getting more standard.
“Other banks and building societies will almost certainly increase their income multiples over time to keep pace with their competitors. While many lenders will only offer higher income multiple mortgages to those earning over £75,000 or £100,000, there are lots that will offer them to those earning much less.
“The banks obviously think that their customers are struggling to get sufficiently large mortgages to get the properties they want and they are reacting accordingly.
“It is good to see these sort of multiples being introduced and major lenders targeting higher earners who are buying their next home, as income stretches have been mainly available for first-time buyers.”
Justin Moy, Managing Director at Chelmsford-based EHF Mortgages, said the Barclays loan-to-income announcement was a potentially good option for those with higher incomes who have more disposable income than average.
He said: “Extending the multiples that lenders can offer to borrowers does come with risks, especially those who end up over-extending themselves at a later date, and it also doesn’t mean that every borrower should ‘max out’ their borrowing.
“But if you can borrow a little extra to buy that home with an extra bedroom, or better location, more like the dream home and not just a rung on the ladder, then it avoids more expensive costs in the near future.”
Earlier this week, Barclays cuts its rates in a move welcomed by brokers.
Photo by Julian Schultz on Unsplash
