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Is there any chance the banks will start reducing their LTI ratios due to the current rate rises?
Gilb
Posts: 9 Forumite
We have had raising interest rates and I have noticed that the banks haven't lowered from the 4.5 LTI ratio they had when the base rate was 0.5%.
I'm wondering at what base rate should I expect the LTI to fall below 4.5?
I'm wondering at what base rate should I expect the LTI to fall below 4.5?
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I dont think the LTI will change, but I am definitely noticing a drop in how much lenders will lend.
I am a Mortgage AdviserYou should note that this site doesn't check my status as a mortgage adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.1 -
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@gilb There's no real need for banks to reduce the LTI caps. In fact, with respect to mainstream lenders and high income borrowers, quite a few lenders have relaxed LTI caps in recent months.Gilb said:We have had raising interest rates and I have noticed that the banks haven't lowered from the 4.5 LTI ratio they had when the base rate was 0.5%.
I'm wondering at what base rate should I expect the LTI to fall below 4.5?
BUT the LTI is merely an upper level cap, what an applicant can borrow is determined by the assumptions that lenders use in the affordability models, interest stress tests, inflation numbers that feed regular expenditure assumptions, how they factor in background debt, etc. And on all those fronts, affordability has been squeezed over the past year.
So you won't see it in the LTI caps but you will see in the lender affordability calculators.I am a Mortgage Adviser - You should note that this site doesn't check my status as a mortgage adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
PLEASE DO NOT SEND PMs asking for one-to-one-advice, or representation.
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The LTI has always been a cap. Lenders will lend up to 4.5x income, it does not mean everyone will get 4.5x income.Gilb said:
How does this happen without the LTI dropping?ACG said:I dont think the LTI will change, but I am definitely noticing a drop in how much lenders will lend.
If you are on £40k a year and have £40k on a credit cards and 5 kids you are not going to get a £180k mortgage not even when rates were 1-2%.I am a Mortgage AdviserYou should note that this site doesn't check my status as a mortgage adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.3 -
Affordability and LTI are two different things. Think the OP is confusing one for the other.I am a mortgage broker. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. Please do not send PMs asking for one-to-one-advice, or representation.0
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