UK Finance has called for loan-to-income lending limits to be eased as part of a package plans to boost the economy.
The banking body has published a Plan for Growth, which proposes a wide range of measures that include reforming prudential regulation to support economic growth, streamlining conduct regulation and delivering a “world-class” payments system.
These plans were submitted to the government earlier this month.
On mortgages, the trade body said lenders currently struggle under “regulatory constraints on mortgage lending that leave finance out of reach for many prospective homebuyers”.
- The Bank of England’s Financial Policy Committee should ease its existing loan-to-income flow limit for new residential mortgages at LTI ratios at or above 4.5 income
- The FCA should consult on removing maturing interest-only mortgages and other outdated guidance, or overlapping standards, such as the Mortgage Charter
- The PRA should build on the government’s planned Freedom to Buy mortgage guarantee scheme by ensuring the element of mortgages guaranteed through the scheme has a reduced, or zero, capital weighting
- Wholesale firms not dealing directly with retail clients should be exempt from the Consumer Duty
The FCA should establish a joint industry working group to ensure the Consumer Duty is used in a way that complements the regulator’s secondary competitiveness and growth objective
The 10-page document calls for a range of other changes that include easing capital requirements for banks of all sizes to support more lending, scrapping the banking levy, lifting the 0.5% stamp duty charge on retail investments and retaining the annual tax-free cash ISA allowance at £20,000.
Several of the banking body’s measures have already been met by government, including scrapping the Payment Systems Regulator and seeing the FCA shelve its ‘name and shame’ approach to investigations, both of which came last week.
Last month Nationwide also called on the government to review the existing 4.5 times LTI limit, citing its Helping Hand mortgage, which accounted for 23% of Nationwide’s first-time buyer mortgages last year, which had to be curbed in January to stay within regulatory lending rules.
Nationwide director of home Henry Jordan said: “We are at the limits of where we can take this product. We have not named a particular threshold but, if the limit was lifted to, say, 20%, we could fund another 10,000 FTBs over the next year.”
The government’s new stance on regulation dates back to a key Mansion House speech by Chancellor Rachel Reeves last November where she said red tape on City firms had “gone too far” following the 2008 financial crisis.
She added that she expected the Square Mile to play a key part in the government’s push for growth.
UK Finance chief executive David Postings says: “Financial services are integral to our economy and to ensure the UK remains a world-leading hub, it needs a regulatory and tax framework that encourages innovation and investment.”
