Home buyers may have the size of their mortgage limited to a multiple of their income under possible reforms outlined by the Financial Services Authority yesterday.
Prime Minister Gordon Brown has advocated a maximum loan-to-value level of 90% but Lord Turner, FSA chairman, said: 'A key choice in product regulation would be between LTV and LTI (loan-to-income) limits. There is a prima facie case that LTI limits are more likely to be appropriate given that it is the relationship between income and loan repayments which determines whether a household can service its debt.'
Average LTI levels have risen a third in the past decade from 2.5 times to 3.2 times, with six or even eight times income once common at some of the more aggressive lenders. As a result, interest payments as a proportion of income soared from 11.5% in 2002 to 18.5% last year.
Daily Telegraph
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