Leeds Building Society now offers up to six times income mortgages to home movers and remortgagers, but experts warn borrowers to consider affordability risks carefully
Leeds said it wanted to help people ‘step up’(Image: tupungato via Getty Images)
A leading mortgage lender has revealed it will now offer loans of up to six times annual income, extending this facility beyond first-time buyers to include those moving home and remortgaging. However, with inflation on the rise and government finances stretched, possibly leading to further tax increases, a mortgage broker has cautioned that this might not be an opportune moment for families to add extra financial burden.
Leeds Building Society has broadened its Income Plus product range to encompass home movers and those remortgaging, not solely first-time buyers (FTBs). These customers will now also have access to borrowing up to six times their loan-to-income (LTI) ratio instead of 5.5 times LTI.
Leeds is currently providing up to six times LTI for FTBs, home movers and remortgagers with a minimum household income of £75,000. Additionally, it will advance up to 5.5 times LTI to home movers and remortgagers earning at least £50,000 annually, and FTBs with a minimum household income of £30,000.
Leeds will extend lending up to 95% loan-to-value (LTV) for FTBs and as much as 90% LTV for home movers and remortgagers. The offering will cover new builds and self-employed applicants and will be accessible on a five-year fixed rate term.
Martese Carton, Leeds Building Society director of mortgage distribution, said: “We’ve supported members into homeownership for over 150 years, but our research shows that a significant number of recent first-time buyers expect to outgrow their homes far sooner than anticipated.
“The increasing price gap between first and second properties presents a real affordability challenge. Many households need just one additional bedroom, yet the step up in price can be substantial and difficult to bridge under standard income multiples.
“By expanding our Income Plus range, we’re aiming to give next steppers greater borrowing flexibility where it’s affordable to do so, supporting more sustainable home moves and helping keep the housing market flowing.”
However, one broker has cautioned that borrowers must exercise care when stretching their borrowing capacity to the limit.
Martin Rayner, director at Compton Financial Services, a mortgage broker, said: “This is the latest example of a lender pushing affordability further, which can be great for some borrowers, but does have its risks.”
Martin noted that enhanced borrowing power could make a real difference in pricier areas of the country, but that people need to ask themselves whether they are happy to be locked in for five years.
He continued: “Yes, greater flexibility around what they can borrow will help some buyers, especially in more expensive and sought-after areas. But moving to six times income, combined with today’s higher mortgage rates due to the war in the Middle East, means significantly larger monthly repayments.
“And there’s the small matter that you are locked in for five years at a far higher rate than you could have secured just two months ago. People really do need to go into a product like this ‘eyes wide open’.
“They need to understand that early redemption charges will be payable if they need to exit the mortgage for whatever reason. Also, if the war in the Middle East ends and rates start falling again, they will have to watch on from the sidelines for the foreseeable future, as they will be locked into a far higher rate.
“I would recommend people think very carefully about this. Just because you can access six times income doesn’t mean you should – a lower mortgage may be far more sustainable.”
Martin also warned that individuals stretching their finances to the absolute limit on mortgage payments could find themselves exposed should taxes or other living expenses increase, even marginally.
He added: “Borrowers need to consider what the next five years might look like, as they will have to live with these repayments for that whole period of time. What if the Labour government increases taxes or energy bills skyrocket? Very quickly the headroom in your finances could be gone and that mortgage payment could start to feel unaffordable.
“Six times income sounds great, but your finances could be hit for six if you are impacted by costs that you cannot control. This isn’t just about getting the mortgage, it’s about being able to live with it comfortably. There’s no doubt this product will be an absolute blessing for some, but seeking advice from a broker and properly considering potential lifestyle changes with products like this has never been more important.”