The number of people taking out a mortgage that is 3.5 times their income has increased but those taking a mortgage at four times their income multiple has stayed steady in the first quarter, data from the Financial Conduct Authority has revealed.
The data for the first three months of this year, derived from the mortgage lenders and administrators return, showed that the proportion of gross advantages of a loan to value over 90 per cent increased by 1.5 percentage points and reached 3.6 per cent in Q1 2014, the highest since Q4 2008.
Compared with the previous quarter, the proportion of gross advances to borrowers with a single income multiple of more than four times income was unchanged at 11.6 per cent in Q1 2014. This has risen in past three years from 8.9 per cent in Q1 2011.
Both the state-owned banks recently took action applying a strict four times income multiple on Londoners who were seeking a mortgage over £500,0000.
Lloyds Banking Group announced this first, notably three days after Bank of England governor Mark Carney warned in an interview the Bank may itself cap income multiples to prevent a bubble. The Royal Bank of Scotland Group closely followed Lloyds’ move.
The proportion of gross advances to borrowers with joint income multiple of more than three times their income dropped by 0.2 percentage points in Q1 2014 to 26.8 per cent. Again, this is significantly up from 22.8 per cent three years ago.
The proportion of new lending that is a combination of an LTV over 90 per cent and loan-to-income multiple of over 3.5 times for single income borrowers, or 2.75 times for joint income borrowers, increased by 1.1 percentage points to 2.6 per cent, the highest since Q4 2008.
The overall value of the residential loan amounts outstanding in Q1 2014 was £1,243bn, an increase of 0.4 per cent compared with Q4 2013 and an increase of 1.2 per cent over the past four quarters.
