How will the new loan-to-income cap affect first time buyers?

Increasing house prices, restrictive lending and rising deposits have all been problems faced by first-time buyers in recent years. So, with the new loan-to-income cap now in place, how are newcomers to the market going to be affected? Here the UK’s leading independent mortgage broker, Mortgage Advice Bureau, reveals how the cap will impact on the currently thriving first time buyer market. “Recent figures released by the Council of Mortgage Lenders (CML) showed that first-time buyer numbers were at a six-year high, showing that a once impossible market has rebuilt itself to become a competitive arena once again,” said Oliver Adair from Mortgage Advice Bureau. “Now, thanks to the Mortgage Market Review (MMR), responsible lending is at the forefront of the industry and each lender has been monitoring their affordability limits closely in light of the recovery of the sector.” Enforced at the beginning of October, the loan-to-income (LTI) cap began when the Bank of England stated that loans over 4.5 times the income of the buyer must account for no more than 15% of a lender’s new lending total. “Affordability remains the most important factor when assessing a potential borrower and every lender will have its own procedures to carry out to determine how the caps are implemented,” added Oliver. Despite the added regulatory changes, the number of first time buyers rose by 27% in the first half of this year, and with the Help to Buy scheme, increasing employment levels and growth in higher loan-to-value lending, the confidence in the market may potentially overpower any effects the LTI cap will have in the coming months. “The effect of the cap on the market and on the first-time buyer arena in particular will continue to be a topic of discussion until the cap has settled and we can see what difference, if any, it will have made,” concluded Oliver. For further information please contact Oliver on 07917 146 430 or email olivera@mab.org.uk. Alternatively, please visit www.dawsonsproperty.co.uk