Barclays has been pressured to withdraw mortgages for sure clients after coming near breaching a regulatory restrict on lending to higher-risk debtors.
The UK financial institution shocked clients final week when it diminished the utmost they may borrow from 5.5 occasions earnings to 4.49 occasions with out discover. The change affected debtors who had already agreed mortgages, placing some property purchases prone to collapse.
The choice was made after Barclays got here near a restrict imposed by the Prudential Regulation Authority, the banking regulator, stipulating that not more than 15 per cent of mortgages for every lender can have an earnings a number of of 4.5 occasions or above, in response to individuals briefed on the choice.
UK banks have been inundated with mortgage purposes in current weeks because the short-term lower to stamp obligation has led to hovering demand for property, with UK home costs hitting file highs final month.
Barclays mentioned: “We not too long ago introduced some modifications to our loan-to-income limits. As a accountable lender, we made this determination to make sure we proceed to stick to regulatory obligations.”
Brokers concern different lenders could possibly be pressured to take related motion within the coming weeks.
NatWest made modifications to its mortgages final week, lowering the utmost loan-to-income fee it supplied self-employed clients from 4.9 to 4.25 occasions.
Brokers added that the Barclays determination got here as a blow to debtors because it coated current purposes — these the place an settlement in precept has been made and an applicant might have paid for a survey or authorized charges and is ready for the lender’s confirmed supply to trade contracts.
It might additionally have an effect past Barclays’ debtors by holding up homebuying chains.
Adrian Anderson, director of mortgage dealer Anderson Harris, mentioned: “It’s unusually brutal. The factor that shocked me was that it included pipeline circumstances.”
“You could possibly be in a state of affairs the place you’ve obtained every thing prepared and also you’re anticipating getting a proposal from the lender. All people else in a sequence may have their provides and also you’re nearly again to sq. one. You could possibly lose your buy.”
One consumer who had been taking a £2m mortgage with Barclays discovered the utmost that could possibly be borrowed diminished to £1.8m. “We might have to start out once more with one other lender,” mentioned Mr Anderson.
Barclays’ mortgages primarily based on as much as 5.5 occasions earnings have been common amongst larger earners, and brokers mentioned demand had elevated within the post-lockdown interval as mortgage restrictions tightened within the wider market.
Aaron Strutt, product director at mortgage dealer Trinity Monetary, mentioned there was “large demand for five.5 occasions wage”, including that Barclays had grow to be “actually common” as a result of no different lender was providing it on the identical phrases.
Mr Strutt mentioned one consumer on Monday morning found her mortgage, which had been agreed in precept, was not legitimate. “She’s on the lookout for options. The issue is there aren’t actually any options for the time being.”
Many property offers have been held up earlier within the yr, whereas demand has intensified because the easing of social-distancing restrictions and the announcement of a nine-month stamp obligation vacation from July.
The PRA declined to remark.