MortgagesApr 24 2014

Shawbrook looks at stretching LTIs above six times

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The sales director of secured lending at Shawbrook admitted the lender had licence to “consider a stretch on LTI if supported by an income and expenditure analysis that stress tests future repayment capability”.

Ms Ward said: “We pride ourselves on working with our brokers to establish the right product for the customer, rather than adopting a computer-driven tick-box approach.

“Our lending criteria do stipulate a LTI of six times and this is carried across our prime plans.

“However, we only lend to creditworthy customers, and income is one element of a range of criteria our underwriting team will consider when making case lending decisions.”

She said any consideration for a stretch on LTI was supported by an income and expenditure analysis that stress-tests future repayment capability, such as the affordability of existing and future outgoings, including mortgage and the new loan payment.

Ms Ward would not confirm whether the lender would stretch to more than six times income, when the loan is added to the first-charge principal, but she said: “If a customer has surplus income after all their expenditure is factored in, and meets our other lending criteria, we are happy to lend.

“We are committed to being a responsible lender and ensuring that our clients are able to comfortably take on loans.”

Reaction round-up

Rob Killeen, director of London-based Capital Fortune, said: “Shawbrook is a highly responsible lender and we believe it will tread carefully to ensure the move is seen as an extension of its flexible lending, rather than a sign of the market returning to its dangerous, pre-crash creativity. We continue to warn that with ever higher loan-to-values, the potential securitisation of mortgages with built-in adverse and the return of the politicisation and overt institutional criticism of the regulator, 100 per cent mortgages appear less than 12 months away. Lessons must be learned.”

Rob Jupp, chief executive at Essex-based Brightstar Financial, said: “The second-charge market in the UK is considerably more dynamic than its first-charge cousin and Shawbrook Bank is the market front runner right now. Underwriting guidelines are less rigid than that of first-charge mortgages, but lenders always treat customers fairly by having a proper analysis of the client’s affordability, as opposed to a formula that is derived from actuarial, theory-based underwriting.”