Nationwide has become the third lender in recent months to clamp down on its loan-to-income multiples for residential mortgage lending, following recommendations by the Financial Policy Committee.
Speaking to FTAdviser, Nationwide confirmed it has imposed a maximum income multiple of 4.75x gross income for all residential lending, including all income types. The move applies across the country and on all loan values.
The move follows that by the Royal Bank of Scotland and Lloyds Banking Group, with the main difference being that the state-owned banks have imposed a strict 4x income multiple on those who wish to buy only in London and where the property is worth over £500,000.
Nationwide has also increased its ‘stress rate’ for all affordability calculations to 6.99 per cent, but the lender declined to confirm what the previous rate was.
Nationwide blamed the new criteria on recent Financial Policy Committee recommendations, published in June. The FPC published a report which said regulators should ensure lenders are not able to hold more than 15 per cent of its mortgage book at an income multiple above 4.5x.
A spokesperson for Nationwide said: “The maximum income multiple cap used in our affordability calculation will be 4.75x gross income for all residential lending, including all income types.
“Nationwide is increasing its stress rate as a result of the recommendations made by the Financial Policy Committee. Nationwide’s approach to affordability is subject to continual review.”
Affordability has been subject to more stringent tests since the implementation of the Mortgage Market Review in April.
In May, Santander, HSBC and Barclays confirmed to FTAdviser they were not looking to follow suit without being forced to by regulators.
