View more on these topics

Shawbrook CEO hits out at ‘crazy’ lending practices

Home-House-Monopoly-Money-Property-700x450.jpg

The chief executive of Shawbrook Bank has criticised some lenders for reckless lending practices that are akin to “shutting your eyes and hoping for the best”.

Steve Pateman has hit out at slack affordability tests that do not sufficiently ensure borrowers can afford their loans once interest rates rise.

He told the Telegraph: “When you see people lending high loan-to-values and doing affordability tests on current payment rates, that is just crazy, it is like shutting your eyes and hoping for the best.

“The big challenge for the economy is that when things normalise, by which I mean normal interest rates and normal inflation, managing the debt burden that the UK currently has will require quite a lot of sensitivity and intelligence.”

Pateman said banks prepared to lend at 90 per cent LTV with fewer affordability checks were leaving themselves “exposed to interest rate risk in a pretty big way”.

He added: “That is why the Bank of England gets concerned, because they worry about loose lending. In that regard, they are right to worry.”

The Mortgage Market Review brought in tighter affordability rules for the owner-occupied sector, although there are currently no rules to govern buy-to-let lending practices.

However, the Bank of England’s Financial Policy Committee will soon be given powers of direction over the buy-to-let market, meaning it will likely be able to place caps on things like maximum loan-to-values and the rental coverage ratio if it deems it necessary.

Recommended

Equity-release-house-home-700.jpg

ERC urges FCA to ease affordability rules

The Equity Release Council is urging the Financial Conduct Authority to consider easing mortgage affordability rules to help consumers make interest repayments before swapping to a roll-up deal. Changes to the Mortgage Conduct of Business rules following the Mortgage Market Review mean that lifetime mortgage contracts which permit consumers to pay interest for a period […]

Santander-700x450.jpg

Santander to introduce two-tiered B2L affordability tests

Santander is introducing a new two-tier buy-to-let affordability calculation as the Government’s tax shake up is expected to increase costs for landlords. From 21 February, the affordability rate for loans up to and including 60 per cent LTV will remain at 5 per cent. For loans over 60 per cent LTV, the existing 5 per […]

Barclays-Bank-building-2013-700.jpg

Barclays adds borrower bonuses to its affordability calculations

Barclays now takes into account bonuses in its affordability calculations as long as borrowers meet its income requirements. Sole applicants must have a gross income of at least £75,000, excluding the bonus. With joint applications, one applicant must have a gross annual income of at least £75,000 or the couple must have a joint income […]

calc

Virgin simplifies online affordability calculator

Virgin Money has simplified its online affordability calculator to smooth out the application process. Previously, when a broker completed an online affordability assessment using the calculator, they were presented with up to three affordability outcomes based on high, medium or low credit scores. But now the calculator will only return one outcome, which the lender […]

Newsletter

News and expert analysis straight to your inbox

Sign up