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Trade body warns regulator over income limits

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Written by: Samantha Partington
26/08/2014
The Building Societies Association (BSA) wants a
Trade body warns regulator over income limits

The trade body will make its case for an 18-month time limit to be added to the LTI rule when it submits its response to the Prudential Regulation Authority’s (PRA) consultation on the proposal, expected to be tomorrow.

Mark Carney has proposed restricting the amount of high LTI lending to 15% of a lender’s new loan book. High LTI lending is considered to be loans advanced which are four-and-a-half times a borrower’s income, or more.

A spokeswoman for the BSA said: “This [sunset clause] is not dissimilar to the approach to the Funding for Lending Scheme or indeed to having a suitable exit strategy for schemes like Help to Buy.”

She said that having a pre-arranged exit strategy would ensure that none of these market interventions became an automatic permanent feature irrespective of market conditions.

The BSA will make its case by pointing to other examples outside the UK where the results of using similar tools to the LTI had failed to achieve their goal or had caused unanticipated consequences.

It will tell the PRA that the effects of the LTI cap are an ‘unknown quantity’ and that while the London and the South East markets will inevitably be cooled by the measures, first-time buyers may also suffer.

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