Six-times salary lending quadruples as lenders loosen affordability

The number of mortgage lenders willing to offer loans worth six times a borrower’s income has quadrupled over the past year as regulatory changes reshape the high loan-to-income (LTI) market.

Latest data from Mortgage Broker Tools (MBT) shows 20 lenders now offer a maximum LTI of 6x or more, compared with just five a year ago. Barclays, NatWest, HSBC UK, Nationwide Building Society and Leeds Building Society are among the lenders to have crossed the 6x threshold during the past 12 months.

The increase follows the Financial Policy Committee’s decision last July to relax the way its high-LTI flow limit applies to individual lenders, prompting 18 lenders to increase their maximum lending multiples.

The changes are beginning to improve borrowing options for higher-income households at a time when affordability pressures continue to challenge prospective buyers.

INCOME STRETCH

Mortgage Broker Tools’ data shows borrowers are also stretching further to secure a home. While average incomes have risen only modestly over the past year, the average LTI requested has increased from 3.8x to 4.0x, with the proportion of applications seeking five times income or more rising from 11% to 15%.

The increase in lender appetite has translated into higher borrowing capacity. The average maximum loan available through the MBT platform has increased from £270,000 to £330,000, while the proportion of cases where no lender could offer an affordable or eligible mortgage has fallen from 14% to 9%.

However, the research suggests borrowing at six times income remains out of reach for many applicants.

Despite the increase in lender participation, 61% of borrowers seeking a 6x income multiple are still unable to find an eligible lender, although this has improved from 86% a year earlier.

“The market is starting to reflect reality.”

Tanya Toumadj (main picture), managing director of Mortgage Broker Tools, says: “What we’re seeing is the market starting to reflect reality: borrowers genuinely need to borrow more, and more lenders are willing to meet them there.

“But ‘more lenders offer 6x’ does not mean 6x is available to every borrower – conditions vary enormously, and the gap between the right lender and the wrong one has never been wider. That’s precisely why whole-of-market affordability research matters so much right now.”