First-time buyers could see mortgage rules eased

Are mortgage rules about to be relaxed for first-time buyers?

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Mortgage rules in the UK might soon be relaxed to support first-time buyers, as part of government efforts to stimulate economic growth, according to reports.

A recent article in The Times revealed that Labour leader Keir Starmer and chancellor Rachel Reeves met with 17 UK regulators to discuss potential reforms aimed at boosting the economy.

The Financial Conduct Authority (FCA) followed up with a letter, published on January 17, confirming that it would examine whether mortgage lending rules introduced after the 2008 financial crisis could be revised.

The changes under consideration reportedly include allowing banks to lend more to first-time buyers with smaller deposits and lower incomes. There’s also speculation about adjustments to financial stress-testing rules and a review of the cap that limits lending to 15% of a bank’s total mortgage book for properties costing over 4.5 times a buyer’s annual salary.

A welcome focus on affordability

Mark Hollands, head of sales and distribution at Bluestone Mortgages, expressed support for the potential changes, emphasising the importance of tackling affordability challenges for first-time buyers. He noted that lending rules have been restrictive for too long, making homeownership feel unattainable for many, despite their ability to manage monthly repayments.

Hollands referenced Bluestone Mortgages’ own research, which found that nearly 37% of first-time buyers see affordability as their biggest hurdle, while 34% struggle to save a sufficient deposit. He also highlighted the need for government measures that address both affordability and support for buyers with small deposits.

Looking ahead, Hollands advocated for greater collaboration between the government and the mortgage industry to tackle the root causes of the housing crisis: “This includes easing the affordability pressures that prospective buyers face as well as providing innovative solutions that help buyers get onto the property ladder.”.

Could equity release help younger generations get on the property ladder?

Saving a large enough deposit to buy a home remains a significant challenge for many first-time buyers. That’s why some families support loved ones trying to get onto the property ladder. We reported on research into this option in October: UK homeowners use property wealth to help first-time buyers.

If somebody wishes to help a loved one but they lack the accessible cash to do so, equity release could provide an alternative solution. By accessing some of the value locked up in their own homes, parents or grandparents could gift money to younger generations for a deposit, helping them secure a mortgage.

This won’t be suitable for everyone, not least because it will almost certainly have an impact on how big an inheritance can be left later on. That’s why it’s essential that anyone considering their options understands the benefits and drawbacks of equity release.

Speaking to an equity release adviser can also help families make informed decisions and explore whether equity release is the right choice for their circumstances.

If you would like to know more about unlocking a tax-free cash lump sum from your home to help a loved one up the property ladder, call us on 0808 178 3055. We’ll arrange a free, no-obligation appointment with one of our selected equity release advisers.

If you’re unable to talk now, request a call back and we’ll call when it’s convenient for you.

Source

Mortgage rules in the UK might soon be relaxed to support first-time buyers: First-time buyers could see mortgage rules eased. FT Adviser. Accessed 30 January 2025.

About Clare Yates. With over a decade’s experience writing about later life financial planning, Clare offers a wealth of knowledge about equity release, pension annuities, wills, LPAs and more. When she isn’t writing, Clare likes to spend her time baking and going on walks with her husband, two children and their rescue dog. Follow Clare on LinkedIn