The Co-operative Bank has become the latest mortgage
lender to offer loans that are calculated at up to five times
a customer's income.
Tuesday, 21 November 2006, 11:03 GMT
At the beginning of November the Abbey, the country's second
largest lender, attracted widespread attention for a similar
deal.
The Co-op said it was stretching its lending criteria so
borrowers could keep up with rising house prices.
It said the offer was aimed at people with stable jobs and
incomes.
Stable jobs
The bank's chief spokesman Russ Brady, said: "It reflects
people trying to get on the housing ladder and trying to match
house price costs."
"But not everyone who applies will get five times their
salary," he warned.
The bank says it will scrutinise each applicant's ability to
repay the loan, and take into account future interest rate
rises, before letting them borrow up to the new higher limits.
Until recently, the Co-op bank offered mortgages at more
traditional multiples of incomes, such as two and a half times
a joint salary, or three or four times a single one.
Growing trend
For several years now many lenders have adopted a more
sophisticated approach to lending mortgages.
Instead of just relying on a crude multiple of income, many
lenders have looked at an applicant's other debts, disposable
income and payment record before coming to a decision.
The recent era of low interest rates has also made it much
easier to lend at larger multiples.
Since the Abbey made its announcement, the Yorkshire building
society and Bank of Ireland have also announced similar deals
for selected borrowers.
There are now 13 lenders who will lend at four and a half
times a single income, or more.
The most generous is the Darlington building society whose
"income stretch" mortgage potentially goes to six times a
borrower's earnings.
However, that era of low interest rates may be coming to an
end.
The Bank of England has recently increased the base rate to
5%, and warned borrowers that they should not count on low
inflation and low interest rates staying forever.
Source: http://news.bbc.co.uk/1/hi/business/6168078.stm
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