Over the festive period, the government reached out to financial regulators, including the FCA, urging them to help shape a regulatory landscape that fosters economic growth.
Among the potential changes under consideration is the relaxation of current mortgage rules. This could see lenders exceeding the existing 15% cap on mortgages issued at more than 4.5 times an applicant’s income — potentially opening the door for more first-time buyers to step onto the property ladder.
Further proposals could also reduce the amount of cash lenders must hold in reserve for higher loan to value (LTV) mortgages and incorporate rental payment history into affordability assessments.
However, questions arise over whether allowing borrowers to access larger loans is a responsible strategy to stimulate the property market or if it merely shifts financial risk back onto individuals. Critics argue that the market has become overly cautious in the wake of the global financial crisis, while others warn against repeating past mistakes.
Newspage sought the views of mortgage brokers to weigh in on whether these proposed changes strike the right balance between accessibility and risk management.
MORE STILL TO BE DONE
Jack Tutton, director at SJ Mortgages, said: “Something does need to be done to support first-time buyers, in particular people buying on their own. Lenders have tried to offer innovative solutions such as Nationwide’s Helping Hand mortgage, however more still needs to be done.
“House prices have far outpaced wage growth, which has compounded the issue, so giving lenders more flexibility to offer higher income multiples at higher LTVs is a step in the right direction.”
JUST ANOTHER BOOST TO HOUSE PRICES?
Rohit Kohli, director at The Mortgage Stop, added: “Supporting first-time buyers is always a positive step, and easing affordability rules could make homeownership more attainable for many. However, we must ensure this approach doesn’t inadvertently fuel rising house prices by increasing demand without addressing the chronic supply shortages in the housing market.
“To truly stimulate the property market and help first-time buyers, the government must tackle the root causes of the supply problem. Too many developers are sitting on land with planning permission, and there’s an unacceptable number of vacant properties that could be put to use.
“While these proposals may give buyers more borrowing power, they echo the principles of schemes like Help to Buy, which improved access but didn’t necessarily lead to long-term affordability. A balanced approach addressing both supply and demand is needed to have a lasting impact.”
STAUNCH GOVERNMENT CRITIC:
Mike Staton, director at Staton Mortgages, said: “Lenders’ income multiple caps have simply not kept up with the times. House price growth surpassed wage growth many moons ago and a review of this is required to keep the flow of first-time buyers coming into the market and onto the ladder. We are at serious risk of creating another barrier for the working class to get on the ladder, especially with the Chancellor hypocritically destroying the dreams people hold of buying their council property.
“The mortgage and housing industry will need pioneers within itself to keep this market alive and help it grow as it appears the current government’s aim is to obliterate it and make home ownership an impossibility.”
RESPONSIBILITY SHIFT
Justin Moy, managing director at EHF Mortgages, commented: “Assuming the normal affordability rules are adhered to, this is a positive step forward, but it still shifts the responsibility back to the borrower in a similar fashion to the Help to Buy scheme.
“Some lenders offer such schemes at the moment, typically paired with a five-year (or longer) fixed deal to ensure onward affordabilty for the next few years at least. One of the biggest challenges with affordabilty calculations are the other commitments in life, not only household bills, but student loans, car finance and childcare costs in particular. As a result, borrowing the maximum under any scheme has its risks. But for the right borrowers this is an important step and will enable them to buy in more expensive areas with income stretches.”
FILIP FOLLOWING CAUTION
Elliott Benson, owner at Sett Mortgages, added: “This is a great news. Working predominantly with first-time buyers, this will be a welcome relief for those trying to get onto the property ladder after the extreme caution shown by lenders since 2020.”
