New mortgage rules in the UK could be introduced – and will be massively relaxed. Financial regulators are understood to be looking at allowing banks and other lenders greater flexibility to allow “responsible risk-taking” from borrowers.
Looser rules on lending could boost homebuying which is generally good for the economy. One idea is to allow banks, building societies and lenders up and down the country to give more loans to buyers with smaller deposits.
Regulators are also examining the rules which limit how much first time buyers can borrow. In a response to the government, the Financial Conduct Authority said it was “already working to remove unnecessary regulation”.
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This is alongside supporting home ownership and “opening a discussion on the balance between access to lending and levels of defaults”. The regulator said it would also work with the Government to remove “overlapping standards” such as the Mortgage Charter.
Rightmove mortgage expert Matt Smith said: “It is really encouraging that the market regulators are now considering what a review of mortgage affordability could look like. Regulatory change is what we’ve been calling for, as that is what is needed to truly impact home-mover affordability, particularly for first-time buyers. We’ve seen some innovative products and schemes announced by lenders to try and do their bit to support home-buyers, but they need support from both the government and regulators to really drive more options for people.”
However, Richard Donnell, executive director of research at Zoopla, warned: “The big question is whether current rules go too far but there is a risk for consumers and the government in how far this might go. Finding the balance not easy and is compounded by the huge north-south divide in affordability.”
Mike Staton, Director at Staton Mortgages said that lenders’ income multiple caps have “simply not kept up with the times”. “House price growth surpassed wage growth many moons ago and a review of this is required to keep the flow of first-time buyers coming into the market and onto the ladder. “