Hodge removes LTI caps for higher earners — good news for contractors

What Hodge has changed

Hodge Bank has removed its loan-to-income (LTI) caps across its residential mortgage range for all borrowers earning £40,000 or more. The bank has confirmed that lending decisions will now be driven by affordability assessments rather than a fixed income multiple ceiling.

Under the previous approach, LTI caps typically restricted borrowing to around 4.5× income — a standard that applies across much of the mainstream market. Hodge's change gives its underwriters the flexibility to lend more where the full affordability picture supports it, without being stopped by an arbitrary multiple.

The change applies across Hodge's residential mortgage ranges and forms part of a wider shift in the bank's criteria towards affordability-led lending. Hodge has historically positioned itself as a lender for borrowers who do not fit standard criteria, including older borrowers and those with more complex income profiles.

Why this matters for contractors

LTI caps are one of the most significant constraints on contractor borrowing — particularly when a contractor's income is being assessed correctly.

Most IT and professional contractors earn between £300 and £700 per day. Annualised at day rate × 5 × 46 weeks, that is between £69,000 and £161,000 a year. The £40,000 threshold for Hodge's LTI removal is easily cleared by almost any active day-rate contractor.

When income is correctly assessed at that level, a fixed 4.5× LTI cap translates to:

• £300/day contractor (£69,000 p.a.) → max loan £310,500 under a 4.5× cap
• £500/day contractor (£115,000 p.a.) → max loan £517,500 under a 4.5× cap
• £700/day contractor (£161,000 p.a.) → max loan £724,500 under a 4.5× cap

With the cap removed and a pure affordability assessment, a contractor with strong income and manageable outgoings may be able to borrow significantly more than these multiples — particularly if they have a clean credit profile, low existing debt obligations, and a large deposit.

The broader shift toward affordability-led criteria

Hodge's move is part of a broader trend in the specialist lending market. The FCA's ongoing consultation on mortgage rule changes has explicitly recognised that borrowers with variable or non-standard income are underserved by traditional LTI-based approaches. Several lenders — including some mainstream players — have been relaxing LTI limits for higher-income borrowers in recent months.

For contractors, who already face the challenge of getting their income correctly identified (day rate vs salary), the additional hurdle of an income multiple cap has historically created a two-layer problem. Lenders who use affordability-led criteria bypass both: they assess actual financial position rather than fitting income into a formula.

This is why specialist broker access matters more than ever. A contractor approaching Hodge directly, or through a non-specialist intermediary unfamiliar with day-rate assessment, risks having their income assessed on the wrong basis — and then losing the benefit of the LTI cap removal entirely, because the income figure presented is wrong.

What contractors earning above £40,000 should do

If you are a contractor earning above £40,000 annualised — which includes almost all day-rate contractors working five days a week — the Hodge criteria change is worth factoring into your current or upcoming mortgage planning:

• If you are buying: the removal of the LTI cap may increase your maximum borrowing at Hodge compared to a prior assessment. It is worth having your broker run updated figures.
• If you are remortgaging: Hodge may now offer a higher loan amount than your current lender, particularly if your income has grown since your last assessment or if you were previously capped at a lower multiple.
• If you were previously declined or underborrowed: an affordability-led assessment changes the calculation. A broker familiar with Hodge's criteria can model the current position before making any applications.