Ministers meet mortgage lenders to discuss plans to hand out bigger loans

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Ministers are meeting mortgage lenders today to discuss plans to make it easier for people to get in the housing ladder, including by handing them bigger mortgages. 

The new economic secretary to the Treasury, Lucy Rigby, and the housing minister, Matthew Pennycook will tell the banks and Nationwide Building Society that first-time buyers are a top priority, as they attempt to accelerate mortgage reforms and build 1.5 million new homes.

Rigby said: 'Helping first-time buyers onto the housing ladder is central to our plan for change.'

'That’s why I’m bringing lenders together to make mortgages more accessible and to highlight new options for first-time buyers - all with the aim of helping more people to achieve the dream of homeownership.'

It follows reforms to financial regulations announced by Rachel Reeves in July, which Labour said would make it easier for those with small deposits and low incomes to get a mortgage. 

The Chancellor's reforms loosened restrictions so that mortgage lenders could offer loans of between five to six times someone's annual salary to a greater number of customers. Borrowing is usually limited to 4.5 times salary. 

The Financial Conduct Authority is also simplifying mortgage lending rules such as affordability checks. 

Opponents have raised concerns that the plans could make buying a home even less affordable by driving up house prices and encouraging borrowers to overextend, at a time when budgets are strained and home repossessions are rising. 

The new economic secretary to the Treasury, Lucy Rigby (pictured) and the Housing Minister will meet mortgage lenders to discuss how they can get more people onto the property ladder

Another meeting took place last week between ministers and building societies, where the lenders explained how products such as no and low deposit mortgages could help more people get on the property ladder. 

The Building Societies Association also discussed how to help more buyers realise they may be able to afford homes they thought were out of reach. 

A number of major lenders have already relaxed their mortgage affordability rules.

Nationwide announced plans to support an additional 10,000 first-time buyers by lowering income thresholds for its ‘Helping Hand’ mortgage. 

Meanwhile Lloyds Banking Group said it has set aside an extra £4billion to lend to first-time buyers borrowing between 4.5 and 5.5 times their salary.

Based on a £250,000 mortgage, it said the extra cash could help 16,000 first-time buyers.

Nicholas Mendes, mortgage technical manager at broker John Charcol says the recent Government changes could help boost homeownership, but only on a small scale.

'In the short term, allowing lending above 4.5 times income, together with low-deposit products, should indeed support buyers into the market,' he said. 

'That said, the scale is still relatively modest compared to the overall housing market, and affordability pressures from high house prices and interest rates remain the bigger constraint.

'Over the medium term, the success of these measures will depend less on regulatory tweaks and more on whether the Government can actually deliver the promised 1.5m new homes. 

'If supply doesn’t keep pace, easier credit risks will simply fuel house price growth rather than sustainably boosting ownership.'