Before people panic, worth noting that the LTI flow test remains – the bit that caps lending at 4-5x the salary.
The bit that is changing is the test as to whether someone can weather a 3 percentage point rise in interest rates. That test was a bit strange, as it failed to take into account how most people use mortages. Specifically, only accounting for the SVR and not fixed deals.
I’m not sure what situations would arise where the salary cap would be higher than the interest rate test, but I’m relatively sure they’d be rare enough.
So there should be no major push or runaway on house prices as a result, as the LTI is the main limiter.
I actually wish they would change the LTI ratio.
At my age I could afford a 25 year mortgage at a 8-10 LTI, but due to the limits and the fact that house properties near where I live are 8x my salary even for a 2 bed terraced without a front yard and a tiny concrete garden, I doubt I’ll ever get onto the market without money from elsewhere
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Before people panic, worth noting that the LTI flow test remains – the bit that caps lending at 4-5x the salary.
The bit that is changing is the test as to whether someone can weather a 3 percentage point rise in interest rates. That test was a bit strange, as it failed to take into account how most people use mortages. Specifically, only accounting for the SVR and not fixed deals.
I’m not sure what situations would arise where the salary cap would be higher than the interest rate test, but I’m relatively sure they’d be rare enough.
So there should be no major push or runaway on house prices as a result, as the LTI is the main limiter.
I actually wish they would change the LTI ratio.
At my age I could afford a 25 year mortgage at a 8-10 LTI, but due to the limits and the fact that house properties near where I live are 8x my salary even for a 2 bed terraced without a front yard and a tiny concrete garden, I doubt I’ll ever get onto the market without money from elsewhere