The average homebuyer in England could be more than £41,000 better off following government reforms and lender policy changes that are easing mortgage affordability constraints, research by mortgage adviser Alexander Hall has found.
The study compared the maximum borrowing possible under the previous 4.5-times income cap with the 5.5-times multiple that many lenders are now offering in response to relaxed regulatory rules.
With an average income of £40,954, an English homebuyer could previously borrow £184,294. The higher multiple raises this to £225,248 – an increase of £40,954.
London buyers see the biggest uplift. On an average income of £54,245, their borrowing potential rises from £244,103 to £298,348, an extra £54,245. Buyers in the South East, East of England and South West gain £44,464, £42,679 and £36,125 respectively.
MORTGAGE GUARANTEE SCHEME
The changes follow the permanent extension of the Mortgage Guarantee Scheme, which protects lenders against potential losses, and an increase in the loan-to-income cap threshold for mandatory limits from £100m to £150m in new residential lending.
Several major lenders have responded with more generous terms. Skipton now offers five times income on its track record product with no deposit required, while TSB and Coventry have reduced stress tests, enabling borrowers to access up to £30,000 and £35,000 more respectively.
Nationwide has lowered income thresholds for its ‘Helping Hand’ range, offering up to six times income at 95% LTV. Accord has extended its 5.5 times ‘Boost’ range to those earning £50,000 or more, and Lloyds Banking Group, including Halifax, has committed an extra £4bn to its own 5.5 times income product for first-time buyers.
CHOICE AND FLEXIBILITY
Stephanie Daley, Director of Partnerships at Alexander Hall, says: “Affordability has long been one of the biggest barriers for homebuyers, particularly in high-cost areas like London, where house prices have outpaced income growth.
“The recent reforms and lender changes have significantly improved what’s possible for many buyers, especially those who were previously unable to gather a large deposit or qualify for a mortgage.
“While there’s still work to be done to address housing supply and planning issues, these changes will open doors for many homebuyers who now have more choice and flexibility in securing their homes.”
