It’s been a busy time for the mortgage market, with a flurry of rate changes following August’s base rate decision, alongside more relaxed lending rules and lower stress rates.
These changes should help boost affordability, making it easier for first-time buyers to get onto the property ladder and for existing homeowners to move to their next home.
Santander is among the lenders which has confirmed plans to let some mortgage applicants borrow more. Under the bank’s new rules, borrowers with a combined household income of £100,000 or more, and who need a mortgage worth no more than 90% of the property value, can now borrow up to 5.5 times their income. This is around 24% more than the maximum they could access before.
Those with smaller deposits — less than 10% — may be able to borrow up to 4.45 times their income. Meanwhile, buyers with household incomes between £45,000 and £100,000 can borrow around 12% more than they could previously.
These changes are possible because the Financial Conduct Authority (FCA) updated its lending rules in July, allowing banks and building societies to approve a higher proportion of loans with larger income multiples, particularly for higher loan-to-value lending.
Nationwide has also eased its affordability assessments, particularly for those remortgaging and opting for five- or ten-year fixed-rate deals. This could allow borrowers to access tens of thousands of pounds more than before.
Sole applicants with a minimum income of £40,000 and joint applicants with a combined household income of £70,000 can now borrow up to 4.5 times their income, up from 4 times their income previously.
According to the building society, this means that prior to the rule change, the maximum someone with an income of £70,000 could borrow was £280,700, but they can now take out a mortgage for £314,300, an increase of £33,600. This example is based on a 20-year mortgage term.
Those who are remortgaging and who do not require any additional borrowing will continue to be able to borrow up to 6.5 times their income, at up to 95% loan to value.
These latest moves show that lenders are becoming more flexible in their approach. However, it’s worth remember that while being able to borrow more may seem appealing, it’s still important to consider affordability over the full term of the loan.
