New MMR affordability rules may raise income multiples

The director of London-based mortgage adviser Capital Fortune said the move away from restricting income multiples in favour of stress-testing borrowers’ affordability could leave room for lenders to offer people bigger mortgages than they currently get.

He said: “Under the MMR affordability rules, lenders have to look at what people can afford and that can differ wildly if you have a borrower who’s a Billy No-Mates, who walks to work and eats at home every night compared to a couple living the high life in the West End of London.”

Mr Killeen’s comments came after the FCA, together with the Bank of England, published a 10-page statistical release on mortgage-lending trends.

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It showed that the overall average interest rate on gross advances declined in the final quarter of 2013 to 3.25 per cent – the lowest recorded rate since the series began in 2007.

The figures also revealed that the proportion of gross advances to high single-income multiple borrowers – more than four times their incomes – rose by 1.1 per cent between Q3 and Q4 last year to 11.6 per cent.

Mr Killeen added: “We have seen lenders such as Newcastle Building Society pushing 95 per cent LTVs pretty hard recently, and in light of this it will be interesting to see how income multiples are affected after April.”

Adviser view

Fahim Antoniades, adviser at London-based Mortgage Centre IFA, said: “Santander will go up to six times income multiple if the borrower has a bullet-proof credit score and Halifax and Woolwich can go up as high as five times income based on credit scoring.”