Mortgage borrowers took advantage of loosened lending criteria in May, selecting significantly larger loans as high street lenders adjusted their affordability calculations, according to new figures from Stonebridge.
The mortgage and protection network’s latest Mortgage Affordability Index revealed that the average loan size rose by more than £11,500 to £205,882 between April and May, as banks and building societies eased their loan-to-income caps and stress testing in line with Financial Conduct Authority (FCA) guidelines.
While both wages and average mortgage rates moved modestly in borrowers’ favour – with salaries up 0.45% month-on-month and mortgage rates down two basis points to 4.47% – these shifts were not enough to offset the impact of rising loan amounts.
The result was a notable deterioration in affordability, with repayments accounting for 38.9% of the average borrower’s income, up from 37% in April.
Stonebridge’s index, which blends official earnings and rate data with the firm’s own mortgage activity, shows May’s figure sits above the long-running average of 38.3%. It marks the sharpest monthly rise in affordability pressure since late 2023, when repayments exceeded 40% of income.
Rob Clifford, chief executive at Stonebridge, said borrowers had responded swiftly to lenders’ revised criteria.
“Mortgage sizes jumped significantly in May as borrowers took advantage of lending criteria changes from several high street lenders,” he said.
“It was pleasing to see wages edging higher and mortgage rates dipping, but those gains weren’t enough to offset the impact of consumers choosing to borrow more, pushing repayments to nearly 39% of the average salary.
“The big question now is whether this marks a temporary uptick in borrowing and cost or a more lasting shift in how much borrowers are prepared to take on. If it’s the latter, we could be entering a phase where higher borrowing levels become the norm, with long-term affordability stats reflecting that choice – after all, this affordability change isn’t driven by rates rising but by consumer behaviour following regulatory changes.”
Clifford added that recent changes in lending policy had sparked renewed activity among a cohort of borrowers previously constrained by tighter limits.
“With more lenders raising LTI caps and easing affordability rules, brokers are seeing renewed momentum in the market, particularly among higher earners and professionals, who now qualify for larger loans.
“That’s opening the door for conversations with customers who may have held back earlier in the year.
“This is a real opportunity for brokers to re-engage, revisit pipeline cases and add value by helping customers understand what’s now possible.”
Stonebridge is one of the UK’s largest independent mortgage and protection networks, responsible for more than £13 billion of mortgage lending annually. Its bi-monthly Mortgage Affordability Index is closely watched by brokers and lenders for insight into borrower behaviour and underlying market shifts.
According to the index, affordability peaked at 40.5% in August last year, before gradually improving through the winter months. The latest increase in May reverses much of that trend, suggesting borrowers’ appetite for higher loans is growing as confidence returns to the market.
