Virgin Money has introduced a maximum loan to income (LTI) cap of 4x for loans greater than £500,000.
The new LTI cap, which was announced via a note to brokers, is based on the lender’s usual allowable types of income and will come into effect immediately, via Virgin Money’s affordability calculator.
Current decisions in principal will also be affected.
A Virgin spokesperson said that the note to brokers formalises a policy that was already in operation.
“We only expect this to impact a very small proportion of our lending and we continue to offer competitive loan amounts to higher earning customers across the country,”
said the note.
The lender is also making other changes to the affordability criteria of its lending policy: single applicants are to receive a “more tailored” approach, that will take into account lower levels of household spending, and it will also be more lenient towards borrowers with small amounts of unsecured debt.
When making affordability calculations, higher levels of disposable income realised by clients earning above £40,000 will also be considered.
Meanwhile, those clients looking for high loan to value (LTV) mortgages should benefit from the lender’s new policy which applies a “strong understanding of affordability”.
For Help to Buy equity loans Virgin Money will now calculate government fees as part of borrowers’ monthly financial commitments, at 3% of the equity loan, as opposed to 4% previously.
The note states:
“While we continue to carefully assess your client’s ability to repay their mortgage, now and in the future as interest rates rise, the changes we’ve made may enhance the amount we are prepared to lend to your client.
“So whether your clients are looking to buy a property or remortgage, our new affordability calculator should enable more of your high quality cases to fit with Virgin Money.”