Lloyds Bank and Halifax loosens mortgage criteria
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Lloyds Bank and Halifax has started mortgage lending at 5.5 times people’s income, up from 4.49.
According to analysis from Mojo Mortgages this makes mortgages affordable for solo buyers in 17 UK cities (21%), up from just three (4%).
For instance, a prospective buyer earning £30,000 could now potentially secure a mortgage of up to £165,000, compared to the previous limit of £135,000 under the 4.5 times ratio.
John Fraser-Tucker, head of mortgages at Mojo Mortgages said: “Our analysis of the UK’s top 80 most populous cities reveals a significant shift in affordability.
“However, it’s important to be aware of the risk too. Whilst being able to borrow more may allow more aspiring first-time buyers to purchase their first home, higher borrowing limits come with higher monthly mortgage repayments. And given that mortgage rates are still significantly higher than they were a few years ago, it’s key that first-time buyers ensure that their payments are manageable.
“There’s also the risk that increased borrowing capacity could lead to rising house prices as demand grows, which could diminish the overarching goal of affordability for first-time buyers.
“Despite these challenges, the overall outlook is optimistic. With mortgage rates beginning to lower following the Bank of England’s recent base rate announcement, there is hope that these changes will create a more favourable environment for first-time buyers.”
In terms of couples, before this change 56 cities (70%) fell below the previous 4.5 mortgage-to-salary benchmark.
Now an additional 13 cities have become affordable, resulting in 86% of cities being accessible for couples on their city or town’s average salary.