MortgagesJul 23 2014

Santander latest to impose mortgage income cap

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Santander has imposed a five times loan to income cap on its residential lending, FTAdviser understands.

The lender has imposed a cap of 5x income, or 4.5x for Help to Buy mortgages. The cap will not exist in isolation and the lender emphasised that its lending decisions are based on a broader view of affordability.

Santander is the fourth lender in recent months to clamp down on its loan-to-income multiples for residential mortgage lending, following recommendations by the Financial Policy Committee.

Yesterday, FTAdviser reported that Nationwide had imposed a maximum income multiple of 4.75x gross income for all residential lending, including all income types nationally.

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.

In June, the Financial Policy Committee 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 Santander spokesperson said: “Santander looks at a number of factors, including how affordable the repayments are for the individual customer, risk profile, loan to value of the property, and income multipliers, when assessing the suitability of a loan application.

“We regularly assess the criteria against which we make loans to ensure we reach the right lending decision for each customer.

“On Friday (25 July), Santander is making a number of changes to its residential lending policy in line with competitors and current market conditions.

“As we have said previously, our average new business income multiplier currently is 2.85 nationally, in London it is 3.63 and we have no reason to believe these will alter going forward, while we continue to work within the guidelines of the new regulation.”