New data from the Financial Conduct Authority and Bank of England indicates that nearly half of all mortgage advances in the second quarter of this year were granted to borrowers with high loan-to-income ratios. Specifically, 46% of gross mortgage advances between April and June fell into this category.
This represents an increase from 41.4% during the same period a year earlier. The rise marks a reversal of restrictions implemented after the 2007 credit crisis, which aimed to prevent borrowers from taking on excessive financial commitments.
Jinesh Vohra, Chief Executive of mortgage payments app Sprive, has expressed concerns regarding borrowers opting for longer mortgage terms, such as 30 or 40 years, to reduce their monthly repayments. Vohra emphasised the importance of understanding the total lifetime cost of a mortgage, rather than focusing solely on the monthly payment.
The trend towards higher loan-to-income ratios coincides with a relaxation of regulatory restrictions in recent years. This shift could have implications for the broader property market, particularly as landlords evaluate their investment strategies.