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Mortgage rules relaxation: "Lenders' income multiple caps have simply not kept up with the times"

Journalist: Justin Moy, Contributing Editor

ended 17. January 2025

Between Christmas and the New Year, the Government wrote to regulators such as the FCA to help create a regulatory environment that enables growth. One possible outcome of this is that mortgage rules may be relaxed to enable lenders to go beyond the existing 15% cap on mortgages above the standard 4.5 times income calculation — a move that would potentially help more first-time buyers onto the property ladder. Other potential changes could see lenders be required to hold less cash deposits to cover higher LTV loans and to include rental payments history, too. Newspage asked brokers if enabling people to borrow more is a responsible way to stimulate the property market. Is this shifting risk back to the borrower, or simply correcting what some say has become an over-cautious approach since the Global Financial Crisis?

13 responses from the Newspage community

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Stephen Perkins
Managing Director at Yellow Brick Mortgages
With house prices consistently increasing far in excess of wage growth many borrowers, but especially first-time buyers, are facing dwindling hopes of house buying. The easing of criteria to allow higher levels of borrowing and smaller deposits would clearly help with that plight, but if the easing goes too far it could lead to irresponsible lending which, longer term, could be a noose around borrowers' necks. The real solution is as always the harder path of building more affordable homes, or bringing back help to buy.
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Rohit Kohli
Director at The Mortgage Stop
Supporting first-time buyers is always a positive step, and easing affordability rules could make homeownership more attainable for many. However, we must ensure this approach doesn’t inadvertently fuel rising house prices by increasing demand without addressing the chronic supply shortages in the housing market. To truly stimulate the property market and help first-time buyers, the government must tackle the root causes of the supply problem. Too many developers are sitting on land with planning permission, and there’s an unacceptable number of vacant properties that could be put to use. While these proposals may give buyers more borrowing power, they echo the principles of schemes like Help to Buy, which improved access but didn’t necessarily lead to long-term affordability. A balanced approach addressing both supply and demand is needed to have a lasting impact.
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Jack Tutton
Director at SJ Mortgages
Something does need to be done to support first-time buyers, in particular people buying on their own. Lenders have tried to offer innovative solutions such as Nationwide's Helping Hand mortgage, however more still needs to be done. House prices have far outpaced wage growth, which has compounded the issue, so giving lenders more flexibility to offer higher income multiples at higher LTVs is a step in the right direction.
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Mark Eaton
COO at April Mortgages
Relaxing mortgage lending rules could help tackle affordability challenges that extend beyond first-time buyers and impact a wide range of potential homeowners.
The current rules are overly restrictive, and more needs to be done to stimulate the market and create opportunities for those locked out of homeownership.
We support the spirit of the concept but only if we ensure borrowers are protected from the future risks of increased monthly mortgage payments often posed by short term fixed rate products.
Concerns about higher borrowing levels leading to payment shocks could be mitigated by encouraging borrowers to opt for more modern longer-term mortgage products as is the case in Europe and more recently introduced into the UK.
These options would reduce the risks associated with end-of-term rate adjustments and provide greater financial stability for homeowners.
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Jonathan Moser
CEO at Mo'Living
One obvious benefit of relaxing the mortgage rules is that more first-time buyers could be helped onto the property ladder. However, there is a risk that enabling people to borrow more will once again send house prices skyrocketing unless the underlying supply issue is resolved. That arguably risks leaving people exposed as they may have overborrowed and potentially overpaid. The government, along with regulators, should tread carefully. The theory is good but the practice could have unintended consequences.
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Mike Staton
Director at Staton Mortgages
Lenders' income multiple caps have simply not kept up with the times. House price growth surpassed wage growth many moons ago and a review of this is required to keep the flow of first-time buyers coming into the market and onto the ladder. We are at serious risk of creating another barrier for the working class to get on the ladder, especially with the Chancellor hypocritically destroying the dreams people hold of buying their council property. The mortgage and housing industry will need pioneers within itself to keep this market alive and help it grow as it appears the current government's aim is to obliterate it and make home ownership an impossibility.
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Riz Malik
Independent Financial Adviser at R3 Wealth
Anything that helps first-time buyers escape generation rent is welcome. Homeownership should be achieveable for all not the select few.
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Justin Moy
Managing Director at EHF Mortgages
Assuming the normal affordabilty rules are adhered to, this is a positive step forward, but it still shifts the responsibility back to the borrower in a similar fashion to the Help to Buy scheme. Some lenders offer such schemes at the moment, typically paired with a 5-year (or longer) fixed deal to ensure onward affordabilty for the next few years at least. One of the biggest challenges with affordabilty calculations are the other commitments in life, not only household bills, but student loans, car finance and childcare costs in particular. As a result, borrowing the maximum under any scheme has its risks. But for the right borrowers this is an important step and will enable them to buy in more expensive areas with income stretches.
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Ben Perks
Managing Director at Orchard Financial Advisers
Lenders will relish these changes. The appetite for first-time buyer lending has never been stronger, so they’ll be glad to see some red tape diminishing. For borrowers it’s welcome news and will help many avoid the crippling cost of rent and the trap that paying rent causes.
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Ross Lacey
Director & Independent Financial Adviser at Fairview Financial Management
We specialise in first-time buyer mortgages and this would certainly be welcome. More lenders offering higher income multiples and adding weight to applications where there's a history of consistently paying rent, likely above the expected mortgage payments, should stimulate the market further. Certain lenders like Nationwide and Halifax are often very competitive for first-time buyers with their Helping Hand and Boost schemes, and the likes of Leeds BS have attractive multiples for households with higher incomes, so we'd love to see more of this from other lenders.
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Dariusz Karpowicz
Director at Albion Financial Advice
With property prices remaining stubbornly high and interest rates elevated, relaxing lending rules could be a practical solution to keep the housing market moving. The current 4.5 times income cap feels increasingly outdated given today's property values and earnings patterns. Without the prospect of significant rate cuts or a market correction, which would be detrimental to the broader economy, adjusting lending criteria - particularly around income multiples and rental payment history - appears to be one of the few viable options to maintain market momentum.
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Elliott Benson
Owner at Sett Mortgages
This is a great news. Working predominantly with first-time buyers, this will be a welcome relief for those trying to get onto the property ladder after the extreme caution shown by lenders since 2020.
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Iain Swatton
Director at Exemplar Financial Services
Lenders relaxing income multiple rules shows welcome adaptability in today’s challenging market. Product innovation is crucial, but caution is key.
We’ve seen before where overly loose lending leads—those lessons shouldn’t be forgotten. At the same time, overly strict rules stifle buyers’ chances. Sensible adjustments that evolve with the times, without repeating past mistakes, will keep the market moving sustainably.