Halifax bank have announced that they will be making some significant new changes to their existing loan to income affordability criteria. These new changes being brought in are a surprising yet encouraging move from a major high street lender like Halifax, but they are very much welcomed by brokers nationwide. So, what exactly are Halifax changing? And what does this mean for borrowers?
Changes To Halifax Loan To Income Affordability
In a message to mortgage brokers, Halifax made the following announcement:
From the 18th of May 2023 we are increasing the qualifying loan to value (LTV) from 75% to 90% for an enhanced maximum loan amount when selecting a 5 year+ fixed rate mortgage product, this will expand the number of purchase or remortgage customers who can benefit.
We are also further improving some of the loan to income (LTI) caps applied as part of our affordability calculation:
- For like for like remortgage customers with no additional borrowing, who receive employed income only, up to 75% LTV and subject to credit score a 5.50x LTI will apply where the standard LTI would normally be below this level
- For employed incomes only of £50,000-£75,000 and LTV 75.01-85% the standard LTI is being increased from 4.75x to 5.00x
Following the affordability changes made this year these changes will help us support even more financially resilient customers with improved affordability outcomes.
For the 5 year+ fixed rate enhancement to apply the whole loan amount must be on a 5 year+ fixed rate, and if porting a product from an existing Halifax mortgage the remaining term on the ported fixed rate product would also have to be 5 years+.
The increased LTI for like for like remortgages would not apply for remortgages on an Affordable Housing scheme (shared equity or shared ownership) where a 4.49x LTI will still apply.
Please see our website Criteria section ‘Affordability, LTI and Income Multiples’ for more information on our LTI limits. This section and our Mortgage affordability calculator will be updated with the above changes from 18 May.
The changes will apply to applications started from 18 May.
What Does This Mean Exactly
In short, it means that lenders are wanting to lend. That’s the most positive thing that this new change implies. It seems that despite the economic struggles and the wariness around lending mortgages, banks and building societies still have an appetite for providing mortgages and want to be able to lend to more people.
For remortgages where no extra borrowing is needed, Halifax will potentially be able to lend up to 5.5X income as long as the mortgage is not over 75% of the value of the property. For employed borrowers who earn between £50K and £75K per annum, and looking for a mortgage between 75% and 85% LTV, a maximum LTI or 5X income is possible.
By increasing the loan to income multiple maximum (how many times your annual income you can borrow), Halifax will lend more to clients and be able to provide the necessary loans to more people instead of alienating a huge portion of the general public who need to borrow more than 4.5X their income.
Speak To a Mortgage Broker For Over 5X Income Mortgages
Senior mortgage and protection advisor at Oportfolio Mortgages Jade Pinkerton had this response to Halifax’s news:
“This indication that enders are potentially moving towards being less restrictive is a good sign. Banks want to lend, and the affordability increasing or even going back to how it was previously is very encouraging to see. However there are other elements to affordability that need to be considered, which is why you should always secure your next mortgage through a broker. We must keep in mind that Halifax and other lenders will still consider the rising cost of living and increased interest rates as part of their mortgage lending assessments – so it isn’t ever as simple as income multiples.”
If you or anyone you know needs to discuss mortgage lending, please give our team a call today. We are here to help.