FIRST-TIME buyers are set to see an “instant impact” from the drive to kickstart economic growth, Chancellor Rachel Reeves is expected to say.
More mortgages will be available at more than 4.5 times a buyer’s income following recent Bank of England recommendations that some lenders can offer more high loan-to-income mortgages if they choose to.
This will create up to 36,000 additional mortgages for first-time buyers over the first year, the UK Government has said.
Britain’s biggest building society – Nationwide – announced last week that it is aiming to increase its high loan-to-income lending limit.
Am I eligible for the scheme?
From Wednesday, eligible first-time buyers can apply for Nationwide’s Helping Hand mortgage with:
- a £30,000 salary, down from £35,000
- joint applicants with a £50,000 combined salary, down from £55,000
It is estimated this will support an additional 10,000 first-time buyers each year.
The changes will sit alongside the creation of a permanent mortgage guarantee scheme, delivering on a manifesto commitment, and a review of Financial Conduct Authority (FCA) lending rules that could allow prospective buyers’ records of paying rent on time to be used to show they can afford mortgage repayments.
What has Rachel Reeves said?
Reforms will be outlined in Leeds ahead of Reeves’s Mansion House speech on Tuesday evening.
Speaking in the City of London, the Chancellor is expected to say: “I welcome the recent changes the [Bank of England's] 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.”
Reeves is expected to 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.
“And I have been clear on the benefits that that will drive. With a ripple effect that will drive investment in all sectors of our economy and put pounds in the pockets of working people.”
What are the bankers saying?
Nicholas Mendes, mortgage technical manager at broker John Charcol, said: “The decision to widen access to Nationwide’s Helping Hand mortgage by lowering the income thresholds will offer an immediate and practical benefit to a group of people who have often found themselves just on the wrong side of affordability criteria.
“For someone earning £30,000 on their own, or couples on a combined income of £50,000, this change could be the difference between continuing to rent and finally being able to move into a home of their own.
“It acknowledges the gap between headline figures and real life, and it shows a willingness to make the system better reflect the pressures people are actually under.
“It will also 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.
“This reform suggests that financial discipline is being recognised more broadly than by salary alone, and that is a very welcome shift.
“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.
“If someone has shown, consistently and over time, that they can manage rental payments at a level equal to or even above the mortgage they are applying for, then it stands to reason that this should be considered a reliable indicator of affordability.”
Henry Jordan, Nationwide’s director of home said: “Our changes mean more people, particularly those on lower incomes, could become eligible for a mortgage.
“We also hope our commitment to further lending provides a boost to the UK’s housebuilding ambitions as well as encouraging other lenders to increase support for those looking for a home of their own.”
What has the HomeOwners Alliance said?
Paula Higgins, chief executive of the HomeOwners Alliance, said the UK Government should “turn its attention to fixing the Lifetime Isa (Lisa)”.
She said: “Right now, anyone forced to withdraw their savings early faces an unfair penalty.”
Higgins added: “And the £450,000 property price cap hasn’t moved since Lisas launched in 2017, despite soaring house prices, particularly in the South East.
“Reforming Lisas would make a real, practical difference to those trying to get on the ladder."
What have the opposition parties said?
Dave Doogan, the SNP's economy spokesperson, told The National there was "no bounds" to Labour's desire to invite comparisons with Thatcher, after Keir Starmer claimed the controversial former PM had "set loose our natural entrepreneurialism".
But Doogan added: "It goes down like a bucket of cold sick in Scotland where communities still suffer from the economic misery she inflicted upon our country.
"While Rachel Reeves may hark back to a golden age for London-based bankers, the fact is at the very time Thatcher rewarded the City, Scotland's heavy industries were being systemically destroyed while our North Sea oil kept the UK state afloat.
"Sir Keir Starmer and Rachel Reeves might see Margaret Thatcher as an idol to emulate, but to increasing numbers of Scots that simply serves to show just how distant Westminster is to the needs of Scotland.
"The Labour Party may plan to cut regulation for London bankers, but the biggest piece of red tape they can cut is Brexit which the Westminster establishment refuse to acknowledge – Scotland is a wealthy country blessed with natural resources, but for as long as we remain tied to broken, Brexit Britain our full potential will never be realised."
Writing in the Daily Express, shadow chancellor Mel Stride said Labour “has taken a wrecking ball to the economy and they are making life increasingly difficult for people up and down the country”.
He said: “Rachel Reeves will no doubt claim today that her plan is working, that she is on the side of working people and that she will help people get on the property ladder.
“But all she is doing is giving with one hand whilst her Labour colleagues take with the other.
“If Keir Starmer continues to roll out the red carpet for migrants, British people will not see the benefit of more home ownership. An ever increasing number of properties will go to foreigners and their families.”
