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Lenders loosen LTI criteria

Sarah Davidson

July 13, 2015

The research firm’s comments followed the Bank of England’s latest credit conditions survey which reported an uptick in secured residential credit availability in the second quarter while for the first time since the Mortgage Market Review implementation, the availability of high LTI mortgages is expected to increase.

Matthew Pointon, property economist at Capital Economics, said: “Demand for mortgages also appears to have recovered strongly after a weak first quarter, with lenders reporting a positive balance of 32%.

“Furthermore, demand is set to keep growing – lenders expectations of future demand showed a positive reading of 15.9%.

“Improved credit availability, in part, appears to be due to lenders successfully adapting to stricter mortgage regulations.

“For the first time since April last year, when new regulations came into force, lenders have reported a positive balance for the maximum LTI expected for loans during the third quarter. That suggests the downward trend in LTIs has come to an end.”

Pointon warned that the market shouldn’t rejoice too soon however. The Financial Policy Committee recently expressed concerns about growth in the buy-to-let market while changes to the tax treatment of buy-to-let investments in the Summer Budget have made the sector less profitable.

He added: “While the outlook for owner-occupied lending remains strong, the buy-to-let sector may face headwinds over the coming months.”

Richard Woolhouse, chief economist at the British Bankers Association, said: “We’re seeing demand for mortgages increase, as consumers take advantage of some of the extremely competitive mortgage deals that are available from banks at the moment.

“This – coupled with the increase in demand for personal loans – shows that people are starting to feel more financially secure and ready to commit to making bigger purchases.”


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