Limited company mortgages at all-time high in buy-to-let market

Mortgage lenders relax criteria with increasing income multiples

Barclays is the latest mortgage provider to shake up their borrowing criteria to lend up to five times a customer’s income.

Where previously they had to be earning at least £45,000 to qualify for higher borrowing levels, borrowers with an income of £30,000 or more will now be considered. It doesn’t come without its catches, however, as borrowers must have a minimum 20% deposit or equity to access the lending.

Increasing income multiples

Barclays is not the only lender making borrowing more accessible this way. According to statistics from the Bank of England, loans above four times the borrower’s annual income now make up almost 50% of all new lending.

Clydesdale Bank introduced mortgages for some professional first-time buyers earlier this year permitting borrowing at 5.5 times their income. Following this, Darlington Building Society launched a new ‘professionals mortgage’ to lend six times an applicant’s salary if they work in specific industries, including doctors, engineers and vets.

UK Finance data shows that the average loan to income has been rising steadily for the past few years. First-time buyers are typically borrowing up to 3.68 times their income now, and home movers are borrowing 3.45 times, both notable increases on the previous year.

Brokers support higher income multiples

National newspapers have criticised the move by lenders to calculate borrowing on higher multiples, suggesting that it is putting consumers at risk of defaulting and potentially creating a ‘mortgage time bomb’. However, brokers have reaffirmed that since lending will only be available to those that can prove they can afford it, these products pose no such risk.

With lenders governing all lending with overall affordability and stress testing, they can be confident that the customer can afford the loan now and in the future almost nullifying the risk.

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