Rachel Reeves will announce financial regulations reforms in a bid to make homeownership a reality for thousands more people.
In a meeting today (15/7) with a group of finance executives in Leeds, the chancellor will set out plans to relax financial regulations, which the Treasury says will address “long-standing industry complaints”.
As part of the announcements, the Bank of England will now allow more lending at over 4.5 times a buyer’s income. This is expected to help around 36,000 more people buy a home over its first year.
The Bank will also help Nationwide support an additional 10,000 first-time buyers by lowering income thresholds for its ‘Helping Hand’ mortgage.
Simplified mortgage lending rules being considered by the Financial Conduct Authority will also make it easier for existing borrowers to remortgage, while the introduction of a permanent government-backed Mortgage Guarantee Scheme will secure the availability of high loan-to-value mortgage products in times of economic uncertainty.
Under current rules, no more than 15% of mortgage lenders’ total new mortgages can offer a loan-to-income ratio of 4.5 or higher each year.
While some argue that relaxing these rules would result in greater risk, others believe that a more liberal approach would improve market access, especially for first-time buyers.
Last week, the Bank’s financial policy committee recommended that the loan-to-income flow limit be changed to allow more lending at high LTIs, while ensuring that the aggregate flow stayed within 15%.
The changes mean that Nationwide’s ‘Helping Hand’ mortgage will now be available to people with lower incomes, with first-time buyers now requiring a salary of £30,000 to be eligible, down from £35,000.
Brian Byrnes, head of personal finance at Moneybox, commented: “It is encouraging to see steps being taken to support first-time buyers. Enabling people to borrow more is not a silver bullet. What first-time buyers truly need is not just the ability to take on more debt, but meaningful, long-term support to help them start saving and investing earlier in life so they can build up that all-important deposit.”
“The Lifetime ISA has already played a pivotal role in helping nearly 3 million young people embed positive saving habits and work toward their first home or retirement. With 80% of Moneybox LISA savers earning £40k or less, it’s clear the product is delivering value, particularly for those on lower to middle incomes.”
“With a few modest updates, including future-proofing the house price cap and reducing the unauthorised withdrawal penalty back to 20%, the LISA could go further in helping young people build financial resilience and reach their homeownership goals sooner. These are the kinds of forward-thinking measures that can deliver real, lasting impact – not just today, but for generations to come.”
