As the housing market grapples with stubbornly high property prices and rising interest rates, the government is exploring a move that could transform the landscape for first-time buyers.
Between Christmas and the New Year, it issued a letter to regulators such as the Financial Conduct Authority, urging the creation of a more growth-oriented regulatory framework.
Among the potential changes on the table is the relaxation of mortgage rules, including the removal of the 15% cap on mortgages exceeding 4.5 times income.
Such a shift could help aspiring homeowners onto the property ladder—but not without risks.
REDUCED REQUIREMENTS
Under the proposed reforms, lenders might also face reduced requirements for holding cash deposits on higher loan-to-value (LTV) mortgages and rental payment histories could be included in affordability assessments.
These measures aim to address affordability barriers that have left many potential buyers locked out of homeownership.
But is enabling people to borrow more a responsible way to stimulate the market, or does it risk repeating the mistakes of the past? Newspage and Property Soup sought the opinions of industry experts.
INDUSTRY REACTION
Stephen Perkins, Managing Director at Yellow Brick Mortgages, acknowledges the challenges faced by first-time buyers.
“With house prices consistently increasing far in excess of wage growth, many borrowers are seeing their hopes of homeownership dwindle,” he says.
“While easing borrowing criteria could help, there is a fine line between assisting buyers and enabling irresponsible lending. The real solution lies in building more affordable homes or reviving schemes like Help to Buy.”
Mark Eaton, Chief Operating Officer at April Mortgages, supports the idea but emphasizes caution.
“Relaxing lending rules could help tackle affordability challenges not just for first-time buyers but across the market,” he notes.
“However, concerns about payment shocks could be mitigated by encouraging longer-term mortgage products, similar to those seen in Europe. These provide greater stability and reduce risks associated with short-term fixes.”
SUPPLY-SIDE ISSUES
For Rohit Kohli, Director at The Mortgage Stop, the key is addressing supply-side issues.
“Easing affordability rules could make homeownership more attainable,” he says.
“But unless the chronic shortage of housing is resolved, increased borrowing power risks driving prices higher.
“The government must focus on encouraging developers to build and addressing the unacceptable number of vacant properties.”
HOUSE PRICE INFLATION
A common concern among industry experts is that relaxing mortgage rules could inadvertently fuel further house price inflation.
Justin Moy, Managing Director at EHF Mortgages, sees merit in the changes but notes that “shifting responsibility to borrowers, as we saw with Help to Buy, has its risks.
“Borrowing to the maximum without addressing household costs like childcare and car finance could lead to affordability issues later on.”
OPPORTUNITY KNOCKS
Several lenders have already begun offering innovative solutions to support buyers.
Jack Tutton, Director at SJ Mortgages, points to Nationwide’s Helping Hand mortgage as a step in the right direction.
“More needs to be done, particularly for single buyers,” he says.
“Giving lenders more flexibility to offer higher income multiples and LTVs is a positive step.”
Mark Hollands, Head of Sales & Distribution at Bluestone Mortgages, calls for greater collaboration between the government and the mortgage industry.
“Easing affordability pressures and providing innovative solutions are crucial to tackling the housing crisis,” he says.
“Nearly two-fifths of first-time buyers cite affordability as their main barrier, while a third struggle to raise deposits. Reducing red tape and offering support for small deposits would make a significant difference.”
BALANCING ACT
While the proposed changes aim to unlock the property market for thousands, they also highlight the need for a balanced approach.
Mike Staton, Director at Staton Mortgages, argues that current income caps have failed to keep pace with the times.
“House price growth has long outstripped wage growth,” he says.
“Unless addressed, these barriers risk shutting the working class out of homeownership entirely.”
Others stress the importance of learning from past mistakes.
Iain Swatton, Director at Exemplar Financial Services, says: “While product innovation is crucial, we’ve seen what happens when lending becomes too loose.
“Sensible adjustments that evolve with the times, without repeating past mistakes, are key to maintaining a sustainable market.”
As policymakers deliberate on these potential reforms, one thing is clear: any changes must strike a delicate balance between boosting affordability and maintaining financial stability.
Only time will tell whether these proposals will pave the way to a more inclusive property market or sow the seeds of future challenges.
