In June, on average, repayments for those taking the first step on the property ladder were equivalent to 22.6% of their total income, the latest banking data showed.
UK Finance, which represents UK banks and mortgage lenders, warned of the current economic uncertainty, the affordability hurdle is likely to persist in the coming months.
It has called on regulators to update their mortgage rules and increase “high time” lending from 4.5 times income to five times income.
LTI is short for Loan to Income and is one of the metrics that lenders use to calculate affordability. As the terms indicate, they will lend an amount no more than 4.5 times the applicant’s income.
Typically, most lenders lend to borrowers at 4.5 times, but some are allowing LTI losses to rise thanks to recent rule changes.
UK Finance said increasing this amount further would improve the ability to lend to creditworthy first-time buyers without materially increasing risk.
“First-time buyers are facing the biggest pressure on affordability since 2008, as rising mortgage rates mean repayments absorb a greater share of their income,” said James Thatch, director of analytics at UK Finance.
