The Chancellor is set to announce “the biggest series of reforms to homebuying regulation in a decade”, which will lead to an extra 36,000 first-time buyer mortgages over the coming year.
Rachel Reeves is expected to say that “red tape that has been holding back the competitiveness of the UK financial sector will be swept away” at a wide-ranging summit of business leaders in Leeds later today.
She will welcome that more mortgages will be available at over 4.5 times a buyer’s income, following Bank of England recommendations that large and small lenders will be able to lift their high loan-to-income home loan lending.
The Chancellor will say this will create up to 36,000 additional mortgages for first-time buyers over the first year.
She will announce that, from Wednesday, Nationwide will be able to make its ‘Helping Hand’ high loan-to-income mortgage available to people with lower incomes.
FTBs will be able to apply for the mutual’s mortgage with a £30,000 salary, down from £35,000, and joint applicants with a £50,000 combined salary – down from £55,000.
Nationwide has said this will allow it to underwrite an additional 10,000 FTB loans a year.
Reeves will also confirm the creation of a permanent mortgage guarantee scheme, to be called Freedom to Buy, ensuring high loan-to-value mortgages continue to be available “in times of uncertainty”,
She will also point to the Financial Conduct Authority’s current review of lending rules “that could allow a prospective buyer’s record of paying rent on time to show they can afford mortgage repayments”.
The reforms are due to be unveiled in Leeds ahead of the Chancellor’s Mansion House speech later this evening.
Reeves is expected to say: “I welcome the recent changes the Financial Policy Committee has announced to the loan-to-income limit on mortgage lending, which the Prudential Regulation Authority and the Financial Conduct Authority are implementing immediately.”
She will add: “Today, I have placed financial services at the heart of the government’s growth mission.
“Recognising that Britain cannot succeed and meet its growth ambitions without a financial services sector that is fighting fit and thriving.
John Charcol mortgage technical manager Nicholas Mendes says: “What has been announced today does feel like a step in the right direction, and a genuine attempt to challenge an outdated structure.:
Mendes adds that a rise in higher loan-to-income lending, “will bring particular value to those in stable, lower-paid roles that are so essential to society but are often overlooked by traditional lending models.
“People working in care, education, retail, and public service are typically in long-term employment and manage their finances carefully, yet they are the very people who have found the doors to homeownership closed to them.”
But he warns: “In areas where property prices remain significantly out of step with average incomes, such as London and much of the South East, it is still likely that even those who now qualify for a mortgage will struggle to find a property within reach.
“The regional disparity in house prices means the benefits of these reforms will not be felt evenly across the country, and that remains an important concern.”
The HomeOwners Alliance were not impressed by the government’s Freedom to Buy scheme, calling it a “political gesture”.
HomeOwners Alliance chief executive Paula Higgins says: “There’s not too much to get excited about here. The Mortgage Guarantee Scheme was originally launched to encourage lenders to offer 95% mortgages, but lenders no longer need that nudge.
“Earlier this year, the number of 95% LTV mortgage deals hit nearly 400, the highest level in almost five years.
Higgins adds: “Since the scheme operates entirely behind the scenes between lenders and government, we don’t expect first-time buyers will notice any difference.
“This feels more like a political gesture than a practical solution to the housing crisis.”
However, Jeremy Leaf, a north London estate agent and former Rics residential chairman, says that the country’s key housing problem is the lack of homes being built.
Leaf points out: “If the government is to get anywhere near its target of 1.5 million new homes by the end of this Parliament, it must appreciate the need to address the continuing fall in building starts and offer better support for demand.
“Developers cannot be told when, where and how much to build, though governments can help to create the environment in which more activity is likely to take place, including giving added confidence for companies and individuals to take on further debt.”
