Significant changes to financial regulation are to be announced today by the Chancellor during a meeting with top lending organisations today in Leeds.
Dubbed the ‘Leeds Reforms’ the changes – which will be pushed through by key regulators such as the Financial Conduct Authority and Prudential Regulation Authority – will include the mortgage sector, the rules for which are to be relaxed in a bid to give prospective homeowners a leg up onto the housing ladder including allowing rent payment history to be used when assessing mortgage applicant suitability.
The Treasury is billing the changes, which cover other financial sectors too, as the largest relaxation of finance rules for a decade.
More mortgages will be available at over 4.5 times a buyer’s income following Bank of England recommendations that some banks and building societies offer more high loan-to-income mortgages – creating up to 36,000 additional mortgages for first-time buyers during the first year of the new rules.
Helping hand
Leading lender Nationwide is the first to help facilitate the scheme via its ‘Helping Hand’ mortgages, which will make it available to people on lower incomes.
The Treasury says that from tomorrow, eligible first-time buyers can apply for this mortgage with a £30,000 salary, down from £35,000, and joint applicants with a £50,000 combined salary – down from £55,000. This will support an additional 10,000 first-time buyers each year.
The more relaxed have been announced alongside the creation of a permanent/relaunched mortgage guarantee scheme which, the Treasury claims, delivers on a Labour manifesto commitment and ensure high loan-to-value mortgages continue to be available in times of uncertainty.
Lending losers
Nicholas Mendes of John Charcol says: “For quite some time now, there has been a growing sense among would-be first-time buyers that the system is not built for them, and it is not because they lack financial responsibility or stability, but rather because lending rules have failed to keep pace with how people actually live, earn and manage their money.
“What has been announced today does feel like a step in the right direction, and a genuine attempt to challenge that outdated structure.
“Equally, the recognition that a person’s history of paying rent should be considered when assessing their ability to repay a mortgage is something many in the industry have been calling for over many years.”
Rob Owens, Head of Research at e.surv, says: “The return of the Mortgage Guarantee Scheme is a positive signal for buyers struggling with deposits, but it’s unlikely to be a game-changer.
“While it helps reduce risk for lenders and opens the door to higher LTV lending, the previous scheme, launched in April 2021, made up a small share of lending – less than 2% of completions over its duration.
Jeremy Leaf, north London agent and former RICS chairman, says: “In our offices, the ending of the Stamp Duty concession in March clearly showed how much of a deterrent finding those upfront costs are to first purchasers in particular.
“More assistance in that regard is essential to significantly improve activity not just in the housing market but job and social mobility generally, bearing in mind its hugely positive impact on wider economic growth.”
Rent record
The Chancellor is to also announce a review of Financial Conduct Authority lending rules that could allow a prospective buyers’ record of paying rent on time to show they can afford mortgage repayments.
Reeves is to say: “I welcome the recent changes the Financial Policy Committee has announced to the loan-to-income limit on mortgage lending, which the PRA and FCA are implementing immediately.
“With an instant impact for consumers, such as Nationwide offering its ‘Helping Hand’ mortgage to more first time-buyers – supporting an additional 10,000 each year.”
Sheraz Dar, CEO of Creditladder, the first and biggest rent reporting company in the UK, says: We very much welcome the announcement from the Chancellor today to help boost homeownership.
“Whilst it’s always important to ensure affordability is a key component of any mortgage lending decision, for too long it’s been felt that tenants who have a history of on time rent payments- often in excess of what a mortgage might cost them – have been unfairly penalised.
“It is for that reason that CreditLadder is delighted to see a review of FCA lending rules that could allow a prospective buyers’ record of on time rent payments factored into the mortgage decision making process.
Read more about mortgage affordability changes.