In moves that can significantly shape the current UK housing market, mortgage lenders are beginning to loosen the affordability rules that have long limited how much prospective buyers can borrow.
6.5 times salary mortgages are back on the market, demonstrating a re-evaluation of mortgage lending rules across the banking sector.
Previous stress testing for mortgage lending had allowed a maximum Loan to Income (LTI) amount of 4.5 times annual salary. These tests were designed to protect consumers and banks following the global financial crisis of 2008/09. But as rates fall and inflation slows, the FCA has indicated that the current approach may be too restrictive.
In its recent guidance, the FCA stated that “the way some lenders were doing their stress testing may be unduly restricting access to otherwise affordable mortgages.” The regulator’s recommendation here has opened the door for lenders to adjust their criteria without exposing their borrowers or themselves to excessive risk.
The new 6.5 x salary mortgage deal, launched in early November. It raises the maximum income multiple available on residential loans beyond that of any other high street bank. To qualify, customers must have an HSBC Premier account and have at least a 10 per cent deposit and either earn £100,000 a year or hold the same amount in savings or investments with HSBC.
In September, Britain’s biggest building society, Nationwide extended the maximum LTI ratio available through its ‘Helping Hand’ product, which is for first-time buyers, that launched in 2021. The extended ‘Helping Hand’ mortgage, the first by a major high street lender to lend up to 6 times income, helping address the affordability challenge that still prevents many first-time buyers from getting onto the property ladder.
Increased LTV products being encouraged here from lenders will help healthy competition in the mortgage market which is good for consumers. Ultimately simplification of mortgage lending and advice rules, that are supported by regulators, lenders and the government is a positive situation.
Henry Knight, Managing Director of Springtide Capital Mortgage Brokers comments:
‘The positive collaboration between the government, regulators and the mortgage industry is good to see. Easing the affordability pressures that prospective buyers face, as well as providing innovative solutions that help buyers get onto the property ladder is welcome. The moves by HSBC and Nationwide reflect a broader shift among UK lenders towards more flexible criteria, as regulators signal a willingness to balance caution with accessibility’.
However, despite the positives, it remains vital to assess in detail factors such as regulatory changes, affordability and broader economic uncertainties that may influence the mortgage market. We are here to help. Our experienced brokers are available today to find the solution that best suits your personal circumstances.
Please contact us on 020 8154 7280
Sources:
HSBC launches 6.5x income mortgage range | Financial Reporter
The FCA confirms it will simplify mortgage lending and advice rules | Springtide Capital