Halifax boosts income multiple to 5.5 times salary

ended 19. October 2021

From Thursday 21 October, the Halifax will be changing some of the loan to income (LTI) limits applied to its affordability calculations. Where income is >£75,000 and LTV<=75%, for loans up to £1m, the max LTI is being increased from 5.00x to 5.50x.

Below is some snap reaction from brokers around the UK…

10 responses from the Newspage community

Star Quote
“Many borrowers are not aware that lenders offer more generous income multiples, particularly to higher earners. They approach their bank or building society and assume they are getting the most generous loan based on their income and overall affordability. More lenders are providing over five times salary mortgages to help borrowers get sufficient mortgages to buy the properties they want. Without these products they may well struggle to get on the property ladder, especially if they have credit commitments or children.”
"While any improvements are always welcome, I'm not 100% sure it's the people with incomes over £75,000 that really need the extra help?"
"There’s all this talk about house prices falling after the flurry of purchases in the past 12 months. But that took place while it was relatively hard to get a mortgage. With high income earners now able to borrow 5.5 times their income on the high street, this will help to maintain price growth as buyers have more ability to increase their bids, especially as it much easier to borrow at high loan-to-values today than it was this time last year."
"It's a positive move that reflects the reality that higher earners have more disposable income, and lenders such as HSBC have been doing this for quite some time. It's scant help, however, for hard-pressed regular earners who can comfortably manage higher rent payments already but to whom the mortgage affordability gods say no."
"I welcome the increase in LTI from Halifax to 5.5. There is always the concern that lenders will return to the free and easy lending of the noughties but I am hopeful Halifax will still carry out their affordability calculations to ensure nobody is over-stretching themselves. It would have been nice to also see this for borrowers with less than £75,000 income, as a higher income does not necessarily mean greater financial responsibility."
This move makes sense as higher earners have more disposable income above the basic expenditures, such as food and utilities. Halifax have also reduced the maximum income multiple for those earning under £40,000 from 4.75 to 4.49, which again makes sense from a responsible lending point of view but is another roadblock for buyers who don't have large incomes.
“There has been a lot of focus on how increases in taxes, utility bills and the cost of living in general might be taken into account by lenders and impact affordability for mortgage borrowers. In truth, however, what lenders are taking away with one hand they are giving back with the other in the form of increased income multiples, with Halifax being the latest in a number of lenders to do so recently.”
“Whilst this may seem significant for those earning over £75k, who want to borrow 5.5x their income, I'm not sure they're the ones who need the most help. The last thing we need at the moment is the ability of borrowers to push prices even further upwards with higher loan-to-income multiples. The knock-on effect could further alienate and price out first-time buyers who are already stretched to breaking point if prices rise with the availability of more credit. Not to mention that affordability for people earning less than £40k has been reduced in the same breath. When will people realise that rising house prices make everyone poorer, not better off?”
It is good to see that lenders are looking to increase the LTI under certain circumstances. Mortgage applications are checked carefully for affordability so the LTI does not really effect this. Provided someone can prove that the mortgage payments are affordable both now and in the future, the income multiple should not be a main feature of a lenders decison.
It's great to see from one of the top lenders. Where the income is above £75,000 it makes sense that the income multiple is higher. Hopefully other lenders follow as there are a few who offer this now.