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Skipton bows to pressure on LTI cap

Skipton Building Society is set to become the latest lender to reduce its maximum loan-to-income ratio, saying it could not hold out anymore.

From 11 May, the maximum LTI will be 4.75 times income, down from 5 at present.

The lender says it will honour any decision in principle within the next five working days. Applications that have passed the DIP stage before 11 May will not be affected.

In a note to brokers today, head of intermediary relationships Paul Darwin said: “We have managed to hold our current LTI cap for as long as possible, being one of just a few lenders to have not changed our income multiple.

“However, we must comply with the Bank of England’s rule that only 15 per cent of our total mortgage lending can be above 4.5 times income.”

In October, the FPC, which is a Bank of England committee tasked with ensuring financial stability, limited lending of over 4.5 times income to no more than 15 per cent of new loans.

The cap was brought in due to fears the housing market was getting overheated and to stop borrowers becoming over-indebted. It led to a number of lenders introducing their own caps, including Lloyds, Royal Bank of Scotland, TSB and Aldermore, among others.  

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