UK announces new rules to make houses more affordable
Chancellor Rachel Reeves has announced new rules to help prospective homeowners in the UK get on the housing ladder, including a new permanent mortgage guarantee scheme.
The new rules form part of broader reforms to financial regulation announced by Reeves that aim to drive economic growth while also supporting first-time buyers.
These changes will see the removal of red tape which the government said is holding back the competitiveness of the UK financial sector, in an effort to make Britain the top global destination for finance over the next decade.
On housing, the Chancellor announced new rules that make mortgages available to more people, along with a review of lending regulation and the launch of a permanent mortgage guarantee scheme backed by the government.
Rules reform and rental history consideration
Regulatory changes affecting mortgage providers will see them now able to offer mortgages at over 4.5-times a buyer’s income, in line with Bank of England recommendations that some banks and building societies offer more high loan-to-income mortgages.
This change will create up to 36,000 additional mortgages for first-time buyers this year, the government said.
As a result of this reform, Nationwide will be able to offer its ‘Helping Hand’ mortgage product to more people with lower incomes.
As of Wednesday 16 July,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).
The government said this change to Nationwide’s mortgage requirements would help an additional 10,000 first-time buyers get on the property ladder each year.
“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,” Reeves said.
Reeves also said that she has also instructed a review of Financial Conduct Authority lending rules which could see prospective buyers’ record of rent payments used as evidence that they can afford mortgage repayments.
If this change is implemented, it will come as welcome relief to those renters who spend much more than their mortgage repayments would be on rent every month, but who are nonetheless deemed unsuitable for a mortgage.
Permanent 95% mortgage guarantee scheme
A key feature of the changes announced today to boost home ownership in the UK is a new government-backed mortgage guarantee scheme.
This scheme addresses the challenge of raising a sufficient deposit for a home by making 95% loan-to-value mortgages consistently available for qualifying first-time homebuyers who want to buy a house with a small deposit.
The new scheme will be permanently available from July 2025, aiming to incentivise and sustain the availability of 91-95% mortgages by insuring lenders against a portion of their potential losses on those mortgages.
Mortgages offered through the scheme will enable eligible first-time buyers and home movers to buy a home with a deposit as small as 5% throughout the United Kingdom, the government said.
Full details of the 2025 Mortgage Guarantee Scheme are available on the gov.uk website.
