Changes proposed allow brokers to serve more clients with higher borrowing needs
Executives from the mutual and co-operative financial sector, including Skipton Group chief executive Stuart Haire, are attending meetings at Downing Street today to discuss the role of mutuals in driving economic progress that benefits local communities and society at large.
Amid these discussions, Skipton Group has renewed its push to amend the Bank of England Financial Policy Committee’s (FPC) loan-to-income (LTI) limit. Alongside other major building societies such as Yorkshire and Nationwide, Skipton co-signed a letter to Meg Hillier, chair of the Treasury Committee, advocating for a revision of the FPC’s current cap.
The existing policy restricts mortgage lending above 4.5 times a borrower’s income to 15% of a lender’s new residential loans. Industry leaders argue that lifting this threshold would enable institutions to responsibly increase support for first-time buyers. According to the group, building societies currently help 35% of all first-time homebuyers.
Skipton is proposing that the cap be raised to 20%, which it says could enable more borrowers to access the housing market, thereby contributing to economic momentum and aiding the government’s goal of delivering 1.5 million new homes. The group also notes the proposal aligns with government ambitions to expand the mutual and co-operative sector.
In tandem with this policy advocacy, Skipton Building Society has introduced several updates to its mortgage lending criteria, effective from Monday. These include a reduction in the stress rate applied to mortgage applications for products with terms under five years, allowing borrowers taking shorter-term products to potentially access higher loan amounts.
The minimum income threshold to qualify for a 5.5 times LTI has also been reduced from £100,000 to £50,000, significantly widening access to higher borrowing limits. For applicants with a loan-to-value ratio between 90.01% and 95%, the maximum allowable LTI has been increased from 4.75 to 5, provided household income exceeds £50,000.
“At Skipton, we continue to recognise the growing affordability challenges facing first-time buyers,” said Charlotte Harrison (pictured), chief executive of homes at Skipton. “Adjusting stress rates alone isn’t always enough, as many would-be buyers are still impacted by the limitations the LTI cap place on our lending. That’s why we’re taking a more comprehensive approach by revising both, while remaining within the current cap.
“And as a result of the changes we’ve made, loan sizes could increase by up to £45,000 (+16%) for a typical household earning £60,000. We continue to support calls for a review of the LTI flow limit. In the meantime, as part of our commitment to supporting more first-time buyers, we’re making changes to the stress rate, lowering the income requirement to access larger loans, whilst increasing our LTI policy at 95% LTV.
“Increasing the LTI flow limit would enable us to help more first-time buyers have a home, in turn boosting economic growth and supporting the Government’s housebuilding targets. Higher LTI lending is subject to the same robust affordability assessments and stress testing as standard lending. Our experience is that customers demonstrate the same if not higher levels of credit worthiness.”
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