Santander has reduced its affordability rates by up to 0.75%, meaning that homebuyers may be able to borrow up to £35,000 more than before.
The lender said a first time buyer couple earning £49,500 between them wanting to buy a property worth £260,000 would only have been able to borrow £196,832 under its old affordability rules. Now, if they took out a 2-3 year fixed rate mortgage they can borrow £210,352, or £13,520 more.
A Santander customer looking to remortgage or move on £385,000 on incomes of between £16,000 and £41,000 would see the amount they could borrow increase £34,192 more, from £210,187 to £244,379.
Santander’s decision to enable people to borrow between £10,000 and £35,000 more, subject to their income, could be copied by other lenders and follows the Labour government’s insistance on UK financial regulators to create an environment that fosters growth.
Guidance from the Financial Conduct Authority to banks earlier this month included making sure lenders supported home ownership which would it easier to get a mortgage.
David Morris, head of homes, Santander UK said: “Helping customers achieve their homeownership dream is a key priority for Santander, but we know that affordability constraints continue to bite. We’re thrilled to be the first major lenders to respond to the updated FCA guidance, alongside introducing a range of reduced mortgageinterest rates today, fulfilling our role as a responsible lender while helping more customers to borrow what they need to release their home aspirations.”
Advisers told news agency NewPage that they welcomed the move.
Bob Singh, founder at Chess Mortgages said it was a brave move and one which will be welcomed as interest rates are not expected to be cut anytime soon.
He said: “It could ensure the market maintains momentum after the stamp duty rush is over next week. The ability to borrow more could plug the gap and be the tonic the market needs until we see further rate cuts. Other lenders will surely follow suit.”
Riz Malik, independent financial adviser at R3 Wealth said: “Santander could now be flooded with applications given their first mover advantage. Considering there were talks of Santander leaving the UK, they have firmly planted their flag. Others will surely follow.”
Katy Eatenton, mortgage and protection specialist at Lifetime Wealth Management commented: “This move by Santander could provide real momentum to the property market, especially if other lenders follow their example as you imagine they will. Though some will fear this could be an ominous step back towards the kind of lending that existed before 2008 and the Global Financial Crisis, I don’t think this is the case. Lenders have long memories and will be very wary of those dark days.”
Chris Barry, Director at Thomas Legal said there will be some nervousness from those who remember 2008 when mortgage lending was regarded as too loose. “However the banks now have much stricter regulations around debt to deposit ratios to prevent banks getting into real trouble”, he said.
Emma Jones, managing director at Whenthebanksaysno.
Craig Fish, director at Lodestone Mortgages & Protection said lenders had become too cautious. He said: “The expectation is that rates are on a downward trajectory so it seems excessive to be stress testing at rates which are unlikely to be seen anytime soon, unless something catastrophic happens. I expect other lenders to follow suit, but I don’t expect this to result in a flood of applications to the market.”
Iain Swatton, director at Exemplar Financial Services commented: “Santander’s move to loosen affordability rules is welcome news for borrowers, offering a much-needed boost to affordability in a market where rising house prices and stubborn interest rates have made it increasingly difficult to get on the ladder or move up it. This isn’t a return to reckless lending, far from it. Lenders like Santander will be closely monitoring borrower conduct to ensure sustainability. If anything, this is a sensible step towards recalibrating the market. There will always be those who err on the side of caution, but measured risk is necessary to drive growth and accessibility. Hopefully, other lenders will follow Santander’s lead, making it easier for more people to achieve their homeownership goals.”
