In its response to the FPC's consultation, the BSA raises concerns about the extent to which the higher Loan to Income (LTI) cap will impact younger buyers in particular. The proposal reduces the ability of individuals to get on the property ladder, meaning that people may not be able to buy until they are much older.
In the next 12 months, up to 20 building societies will be affected by these measures. Actual lending by building societies at LTI's of 4.5 times or more has been low this year to date, accounting for under 7% of all lending. However in its submission, the BSA recommends that smaller lenders with gross mortgage originations between
The FPC's recommendations are in response to current market conditions. To stop these becoming permanent additions, the BSA also recommends that a 'sunset clause' be introduced. This would also give the FPC the opportunity to weigh up what effect it has had and remove the measures after 18 months if market conditions improve.
"This is the first time that macro-prudential tools have been used to control the housing market and the actual effects are an unknown quantity. Of course, affordability is crucial and banks and building societies should only lend what a customer can reasonably repay, however our concern is the effect these measures will have on first time buyers in and around the capital."
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