Of Mortgages and Mansion House

Sitting behind all these proposed changes to mortgage lending, affordability sits behind the decisions made by lenders, which was not necessarily the case in 2008. Whilst changes expected to be announced will help more enter the property market, lenders will still rely upon affordability to manage risk effectively. Freeing up restrictions on Loan to Income (LTI) limits for lenders working with borrowers with smaller deposits will make the greatest impact; the rehash of the Mortgage Guarantee Scheme feels unnecessary at the moment.

Affordability criteria has tightened too much and taking the brakes off will allow more people to climb the housing ladder. Lenders need to be incentivised to reduced rates for near 100% lending as this will be the main reason for low take up. Even with these changes we will still be a very long way from the extremes of dangerous lending like self cert mortgages, so it’s positive to see someone lubricating the industry.

This a a great lesson in ‘How to look like you’re doing something, without actually doing something’. There are many lenders that have gained a level of comfort in 95% lending over recent years, they don’t need a government backstop. They’ll gladly take it, but supporting lenders shouldn’t be the focus. Bigger boosts for deposit saving would have been more beneficial to borrowers. A way of helping stuck renters to save whilst renting would be a welcome change too. Great that they’re keen to help First Time Buyers, but innovation is needed. Propping up lenders isn’t the answer.

This is a positive move that will get more people on the property ladder.

We've seen countless examples of high-earners paying much more in rent than they'd pay on a mortgage under the current income multiples.

However, it's important to note that lenders will still look at affordability and stress-test the ability for borrowers to cope with higher rates in the future. This wasn't as stringent historically.

We feel that more needs to be done to prepare borrowers mentally for paying more when they come to remortgage. It may not be that they do, but one of the problems more recently is that although affordable, many have been comfortable with sub 2% interest rates and may have over-extended elsewhere since taking out their mortgage, so their ability to find the extra monthly payments when remortgaging onto a 4% rate has been squeezed. Lenders wouldn't have lent in the first place had they have not been able to afford a 4% rate though.

Loosening affordability rules might help some first-time buyers, but this isn’t the fix the market needs. The real issue is supply - and that means stopping developers from sitting on land with planning permission. If they don’t build within a set timeframe, that permission should be removed. And if homes aren’t built within say 2 to 3 years, councils should charge full council tax on the number of properties that were originally approved to the developer. The government should be fixing the system, not fuelling demand for homes that don’t exist. Letting people borrow more to compete for the same overpriced properties is a distraction - and a dangerous one. We’ve seen where that leads.

Raising income multiples could help more first-time buyers, especially in high-cost areas but only if it's done sensibly.

Lenders must keep robust stress testing in place to avoid borrowers getting in over their heads.

The Financial Crisis taught us the danger of unchecked lending but the world has changed.

Affordability checks are tougher, credit histories more transparent, and digital underwriting is smarter.

This could be the shot in the arm the market needs so long as it’s delivered with a healthy dose of caution and monitoring.

The reality is that there will always be people that struggle financially at some point during their life and the whole point of underwriting is to mitigate risk and not eradicate it. Affordability can be an issue, particularly in the South East so the relaxation of the rules is a good thing for those starting out. The stress-testing has worked as the impact during Covid and the financial crisis was testament to that. There were casualties which will never be avoided. The Mortgage Guarantee Scheme is a bit of a not needed dud as many lenders are already in this arena however, enabling lenders to increase the borrowing book for first-time buyers should be welcomed as they are generally the property chain starters due to the decimation of the rental sector.

All eyes are on Rachel Reeves after recent events, and this Mansion House speech could be her moment to show that UK Plc is open for business. A loosening of the leash on financial services would inject much-needed energy into a sector that's been on life support. This is a defining moment for the Chancellor. She understands the lessons of the financial crisis but also recognises that bold action is needed to get the UK economy firing again.

Rachel Reeves' Mansion House proposals feel like déjà vu with a safety net - we're loosening the purse strings again, but this time with proper affordability checks rather than the wild west of self-certified mortgages. Unlike pre-2008's dangerous lending extremes, today's approach maintains stress testing and transparent credit histories, though any relaxation still risks putting vulnerable borrowers in precarious positions when life throws curveballs.
The real elephant in the room remains housing supply - we're essentially helping more people compete for the same overpriced properties rather than building more homes. Whilst robust affordability criteria did protect borrowers during Covid and recent rate spikes, loosening these rules now feels like treating symptoms rather than the disease. It's politically expedient but potentially shortsighted: without addressing supply constraints, we risk inflating prices further and creating bigger mortgages for everyone.

The last 5 years have been much more difficult than the financial collapse in 07/08, within a year and a half the crisis was done and forgotten, we have had an avalanche of catastrophies during the last 5 years that have been unprecedented, from covid, to the fuel crisis, the war in russia, Mays catastrophic budget and Trumps egotistical Trade war leaving the mortgage industry in tatters. We need people to look at the mortgage industry from the viewpoint of the public, not a group of millionnaires with no concept of current day civillian life looking down from their ivory towers. Anything Rachel Reeves does now will be a contradiction on her existing policies as she tries to erratically win back favour from the voters that she and her party have financially shafted on their campaign of broken promises and Tyrannic treatment of homeowner and small business owners. The best thing the labour government could do for the mortgage industry is to accept failure and resign from power.

After the reduction in stamp duty thresholds for first-time buyers in April 2025, the loosening of affordability criteria will be welcomed by many struggling to get on the property ladder. But if Labour’s growth plan fails to deliver, a rise in interest rates could trigger a painful surge in arrears and repossessions.