Loan to income caps are increasing for big lenders

by | Tuesday 5th Apr 2022 | Mortgage News

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Both Halifax and Scottish Widows have announced today that there will be a dramatic shake up with their loan to income rules from Wednesday the 6th of April.

Both lenders will be increasing their loan to income affordability from 4.49X to 4.75X income meaning that thousands of new and existing borrowers will potentially be able to achieve higher loans than previously.

What does this actually mean?

Now, although it seems like not a huge change figures-wise, lets take a look at a real-life example. Say someone earns £80,000 a year and has no major credit commitments.

Following Halifax and Scottish Widows current criteria, the maximum loan they should be able to offer would be around £359,200.

Using the new 4.75X loan to income cap, this could potentially go up to £380,000. A £20,800 increase in affordability which could make all the difference.

Are there any restrictions?

There are however some rules and not every borrower will have access to these loan to income caps.

Both Halifax and Scottish Widows have announced that for incomes of over £75,000 per annum where the loan to value (LTV) is 85-90% and the loan amount is less than or equal to £500,000 the loan to income is being increased from 4.49x to 4.75x.

Any loan or income that deviates from this rule is still subject to the regular 4.49X.

What the experts say:

Content Manager at Oportfolio Mortgages Louis Mason had this to say:

“This is great news coming out of Halifax and Scottish Widows, two very popular and very good mortgage lenders.

Although it won’t apply to everyone looking for a mortgage, this new change will help a lot of people to achieve mortgages that otherwise might have been unattainable.

It is also another encouraging step in the right direction for lenders that shows that are regaining more confidence to lend post pandemic.

We at Oportfolio are all very excited about what other new developments and rule changes that lender will be releasing soon.”

Speak to a loan to income specialist advisor:

If you or someone you know is struggling with their mortgage affordability and you think that these new changes from Halifax and Scottish Widows might be a benefit, feel free to give us a call on 02088771169 to talk through your options.

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