Barclays has announced it is capping its maximum mortgage income multiple at 4.49x single or joint incomes for borrowers purchasing a property or remortgaging.
The reduced 4.49 multiple applies to all loan-to-values, loan sizes and income scenarios except for where a loan-to-value is greater than 90 per cent and the joint income of the household is equal to or below £50,000, and where the debt to income ratio is equal to or above 20 per cent. In these two cases, the income multiple has been lowered to four times salary.
Aaron Strutt, product director at Trinity Financial, says: “Barclays was one of the first big lenders to provide 5.5 times salary mortgages to borrowers earning over £75,000 or £100,000 jointly and has helped lots of borrowers to get on the property ladder.
“The income multiple cut is pretty drastic and will lead to a significant reduction in the size of the mortgages it provides to many borrowers. To make it worse, this move will almost certainly mean many buyers will have to pull out of their purchases because the new rules will apply to applications that have been submitted and not offered.”
Like other providers Barclays has to stick to the PRA's rules to ensure that mortgage lenders do not extend more than 15% of their total number of new residential mortgages at loan to income ratios at or greater than 4.5.
|Barclays new mortgage income multiples|
|All loan-to-value, loan size and income scenarios except those listed below.||4.49x single or joint income|
|Loan-to-value >90% and joint income up to £50,000||4.00x single or joint income|
Debt to income ratio >20%*
*Debt to Income ratio is calculated as ‘monthly credit commitments after completion’ as a percentage of ‘gross monthly income’
|4.00x single or joint income|
It is still possible to get a 5.5 or even six times salary mortgage but it is not a straightforward as it was before the coronavirus hit.