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Nationwide caps LTI and tightens stress tests

Sarah Davidson

July 22, 2014

Previously the building society used an income multiple cap as one element of affordability which varied depending on application.

A Nationwide spokesman said: “We are introducing these measures to reflect the new recommendations announced by the FPC, and as part of our ongoing commitment to responsible lending.”

The move follows the Financial Policy Committee’s decision last month to ensure that from October 1 no more than 15% of total new residential mortgages stand above a LTI ratio of 4.5.

David Sheppard, managing director of Perception Finance, said: “I don’t think having a situation where they are inconsistent is helpful so at least they’re being clear.

“I would be surprised if many brokers were getting above that level anyway. Going above such a loan to income isn’t something that’s been possible based on their affordability calculation.”

Sheppard added that he expects Santander to impose a similar LTI cap soon.

Paul Broadhead, head of mortgage policy at the BSA, stated that moves to limit high LTI lending are intended to safeguard the future of the market.

He said: “The Bank of England has said that only 8% of mortgage lending is above 4.5 LTI, so the announcement is something for the future.”


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