Lender also raises LTI cap for self-employed borrowers
High street lender TSB has announced a reduction in its stress rate for all residential mortgage applications, lowering it to 6.75% or 1% above the product rate, whichever is higher.
The move, effective immediately, marks a cut of up to 2% and is expected to raise the borrowing capacity for a typical joint applicant by about £30,000, based on a combined income of £75,000 and a 90% loan-to-value ratio.
The revised stress rate applies to all new residential mortgage customers, including both first-time buyers and those moving home.
TSB’s stress rate cut reflects a broader trend in the UK mortgage market, as major lenders including Santander, Leeds Building Society, Barclays, and Nationwide have recently loosened their affordability criteria. Prompted by the Financial Conduct Authority’s guidance on flexible stress testing, these adjustments have made it possible for first-time buyers, home movers, and remortgagers to secure significantly higher loan amounts.
Earlier today, Coventry for intermediaries also eased its mortgage stress test, giving typical borrowers the opportunity to increase their borrowing by up to £35,000 when buying a home.
Meanwhile, TSB has also raised its loan-to-income (LTI) limits for self-employed borrowers. Those earning between £75,000 and £100,000 can now access mortgages at up to five times their income, provided the loan-to-value does not exceed 85%.
For self-employed clients with incomes above £100,000, the LTI cap has increased to 5.5 times income, also for loans at 85% LTV or below. Previously, the maximum LTI for these groups was 4.49.
“TSB customers now have more flexibility to borrow more – making their money go further towards their first home, or their next home,” said Craig Calder, secured lending director at TSB. “We know that homeownership can feel out of reach for some, but these small changes are really important ones that will boost affordability and open the door for more people to get on the property ladder.”
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