Skipton BS cuts resi stress rate and urges reform of 15% LTI cap

Skipton Building Society has lowered its residential stress rate for shorter-term deals, lowered the income threshold for higher loan-to-income (LTI) deals and increased the maximum LTI for higher loan-to-value (LTV) lending.

The mutual said it would offer a reduced residential stress rate for short-term products, so customers taking a deal under five years will not have their borrowing potential negatively impacted.

The minimum income to access 5.5 times LTI has been cut from £100,000 to £50,000, which Skipton Building Society said would open up “greater borrowing potential to a wider group of customers”.

For customers looking for higher-LTV deals from 90.01% to 95%, the maximum LTI has been increased from 4.75 to five if the household income exceeds £50,000.

Skipton Building Society, and its wider group, emphasised its calls for an increase on the 15% LTI limit.

The 15% limit restricts lending above 4.5 times income to 15% of a lender’s book, and Skipton Group has called for this to rise to 20%.

It argued that this “modest but impactful” change could “deliver meaningful societal benefits”, as more first-time buyers could access the market.

Skipton Group added that it would help “stimulate economic growth” and support the government’s one-and-a-half million homes target.

It would also help meet the government’s commitment to double the size of the mutual and co-operative sector.

Stuart Haire, Skipton Group’s chief executive, Yorkshire Building Society’s CEO and Nationwide’s CEO have written to Treasury Select Committee chair Dame Meg Hillier to highlight the need to raise the limit.

Charlotte Harrison (pictured), CEO of homes at Skipton, said: “At Skipton, we continue to recognise the growing affordability challenges facing first-time buyers.

“Adjusting stress rates alone isn’t always enough, as many would-be buyers are still impacted by the limitations the LTI cap places on our lending. That’s why we’re taking a more comprehensive approach by revising both, while remaining within the current cap.

“And as a result of the changes we’ve made, loan sizes could increase by up to £45,000 (+16%) for a typical household earning £60,000.”

She added: “We continue to support calls for a review of the LTI flow limit. In the meantime, as part of our commitment to supporting more first-time buyers, we’re making changes to the stress rate, lowering the income requirement to access larger loans, whilst increasing our LTI policy at 95% LTV.

“Increasing the LTI flow limit would enable us to help more first-time buyers have a home, in turn boosting economic growth and supporting the government’s housebuilding targets.

“Higher LTI lending is subject to the same robust affordability assessments and stress testing as standard lending. Our experience is that customers demonstrate the same if not higher levels of creditworthiness.”

Skipton Building Society is the latest lender to increase its stress rate, with Hodge, Nationwide, Accord Mortgages, NatWest, HSBC, Lloyds Banking Group, Precise Mortgages and Santander all changing their stress rates in the past few months.