The Bank of England is issuing “looser” mortgage rules to help first-time buyers get on the property ladder under the Labour Party government.
New mortgage rules are being rolled out for thousands of UK households set to benefit. The Bank of England is issuing “looser” mortgage rules to help first-time buyers get on the property ladder under the Labour Party government.
The move from the BoE comes in a bid to encourage high street banks lenders to offer more high loan-to-income mortgages and help 36,000 buyers on to the housing ladder.
The shake-up means banks and building societies can offer more high loan-to-income (LTI) mortgages, which are equal to, or worth more than, 4.5 times a borrower’s annual earnings. Sam Woods, the chief executive of the Bank’s regulatory arm, the Prudential Regulation Authority, said: “It’s more than a tweak.
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“If you look at the unused capacity that’s there at the moment, we think that’s equivalent to another 36,000 high-LTI, first-time-buyer mortgages per year in the UK.”
Individual lenders will now be able to have more than 15 per cent of their lending at a high LTI ratio, although the sector as a whole will continue to have a 15 per cent cap, the BoE said.
The BoE said the move should allow more first-time buyers to get a mortgage, although it added that lenders’ deposit requirements were a bigger barrier for most borrowers.
The regulators’ rules define riskier mortgages as those with a loan value above 4.5 times the borrower’s income. The BoE said banks’ unwillingness to risk a breach of the 15% cap on such loans meant individual lenders had stayed well below the threshold, constraining growth of the mortgage market.
Banks’ aggregate share of high loan-to-income lending hit 9.7 per cent in the first quarter, the BoE said.
The means few individual lenders were in any case likely to reach the 15 per cent aggregate sectoral limit.
Allowing some individual lenders to go above that threshold would likely only lead to an overall share of such riskier lending hitting 11 per cent by the end of 2025, the BoE said.
