Homebuyers with car loans are now able to borrow thousands more on their mortgages than they could just six months ago, according to new analysis from Coventry Building Society.
The change follows updated guidance from the Financial Conduct Authority (FCA), which has given lenders greater flexibility in how they conduct affordability checks.
In March, a single buyer on the average UK salary with a monthly car payment of £345 would have seen their maximum borrowing reduced by more than £18,000. Under the new rules, the same payment cuts just £5,000 from what they can borrow – a difference of almost £13,000.
Joint buyers, both earning the average salary, would previously have faced a £13,000 reduction each if they both had car finance. Now the same borrowing power is trimmed by £5,677.
The FCA reforms are part of a broader effort to make homeownership more accessible by removing some of the harsher constraints in affordability testing.
Jonathan Stinton, head of intermediary relationships at Coventry Building Society, said: “Just a few months ago, a typical car payment could reduce borrowing power by over £18,000 – that could mean people had to compromise on space, location, or put the brakes on their move altogether.
“Now, thanks to regulatory changes, that impact has dropped to around £5,000. It’s a big shift, and it gives borrowers more flexibility to balance lifestyle choices like car ownership with their homebuying goals.
“That said, a car payment still affects how much clients can borrow – it’s just not the deal-breaker it used to be.
“Brokers can help clients navigate these changes to make more informed decisions, especially when remortgaging or adjusting terms.”
The FCA’s new guidance also makes it easier for borrowers to manage existing loans. Clients remortgaging to a cheaper deal may no longer need a full affordability assessment, and term reductions can be processed without the same checks that previously applied. Borrowers can also approach lenders with questions without triggering advice rules, giving them more scope to explore their options.
Two older pieces of guidance, covering interest-only mortgages and cost-of-living support, have been withdrawn. The new rules came into effect immediately, allowing lenders to apply them without delay.
