Higher income clients are now able to borrow up to 5.5 times
Barclays has made two enhancements to its loan-to-income (LTI) policy, increasing the loan multiples for higher income earners.
The high street lender now allows joint customers with £75,000 to £100,000 joint income access to 5.5x LTI, up from 5x. Customers with £45,000 to £60,000 joint income can also access 5x LTI, up from 4.49x.
The improvement to Barclays’ affordability model follows its recent move from a hard credit footprint to a soft credit footprint before submission of the customer’s application.
“This move from Barclays is a great sign that confidence is returning to the market, and that we may well be over the peak of this current interest rate cycle,” commented Richard Campo, founder at Rose Capital Partners. “Even if the base rate, and therefore mortgage interest rates, hold around this current level, it will give other lenders the confidence to loosen the purse strings.
“While it looked like interest rates were constantly rising off the back of the mini budget and inflation, I can understand why lenders were more cautious on their affordability models. Now we seem to be over the hump, and this news will be a great boost to anyone looking to move as it will help increase their budgets and make a larger purchase more viable.”
For Ranald Mitchell, director at Charwin Private Clients, this was “a welcome move by Barclays to recognise that one size does not fit all.”
“Higher income earners have more disposable cash and the ability to afford mortgages than lower-income households, so increasing the loan multiples makes sense,” he pointed out.
Justin Moy, managing director at EHF Mortgages, added that these improvements in the affordability model would be of great benefit to borrowers and, when coupled with improving rates, were another vote of confidence in the mortgage market.
“For those with good incomes, and low commitments in particular, this will give them a huge advantage, and will encourage other lenders to follow suit. With the bun fight for mortgage business at the moment, lenders are definitely looking beyond rates to add value.”
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