Boulger blasts LTI caps
Santander will prevent first-time buyers from borrowing more than 4.49 times their income from Friday on new applications, while in January Barclays introduced an LTI cap of 4.5 times on all of its mortgages.
Boulger said: “it is a backwards step to be introducing income multiples again.
“People who don’t already have financial commitments are penalised which is a clear demonstration of why affordability is a much better step than income multiples.
“This will also disproportionately affect first-time buyers, as they are the ones that will likely see their incomes go up faster than average.
“It’s a ridiculous time to be doing this as the general view is that interest rates are going to stay lower for longer, so from an affordability point of view there’s no justification.”
Boulger blames the twin regulators of the Financial Conduct Authority and the Bank of England’s Financial Policy Committee for getting in each other’s way.
He added: “The new system of having two regulators is already being shown to have some negatives.
“The Bank of England is saying income multiples are key and FCA is saying affordability is key.
“Whilst one of these measures on their own might make sense together they are too restrictive.”
The FPC advised that from October 1 lenders must limit lending above an LTI ratio of 4.5 to 15% of total residential lending, while it was handed full powers last week.
As lenders introduce tighter LTI caps others tend to follow suit to avoid having a disproportionate amount of business in one category.
A Santander spokesperson said: “We remain committed to lending and have a range of products, with strong rates, which support everyone looking to secure a mortgage.”