More Power for First-Time Buyers
The cap on high loan-to-income (LTI) lending, previously limited to 15% of a lender’s book above 4.5x income, has been eased. The income threshold before that cap kicks in has been raised from £100m to £150m annually, allowing smaller lenders to offer higher LTI deals.
Nationwide, Accord, and Scottish Building Society are already jumping in. Nationwide, for instance, has dropped its minimum income requirements to £30,000 (sole applicants) and £50,000 (joint), offering up to 6x income with just a 5% deposit. This could add 36,000–76,000 more FTB approvals per year.
Much of this is supported by the new government-backed “Freedom to Buy” scheme, which boosts 95% loan-to-value lending.
Since 2021, over 60,000 buyers have used schemes like Nationwide’s Helping Hand, and these changes could enable 10,000+ buyers more each year. A single earner on £35,000 can now borrow over £210,000—enough to buy a new-build in many UK regions, far more affordably than before.
A Smoother Path to Remortgage
The FCA has also simplified remortgaging. Borrowers switching to a lower or same rate, shortening their term, or remortgaging without increasing borrowing no longer need full affordability checks. Most cases now require only a light or modified assessment, meaning fewer documents, less stress, and quicker approvals.
Lenders like Nationwide have also acted on the FCA’s updated stress testing rules, allowing actual product rates to be used instead of punitive reversionary rates. As of mid-July, some stress test rates have dropped by 0.75–1.25%, increasing borrowing power by £28,000+ on average. In some cases, borrowers could see increases of over £40,000.
Why It Matters
With 1.6 million fixed-rate mortgages expiring in 2025, many homeowners, locked into post-COVID rates of 5–6%, can now switch more easily to better deals. Time-sensitive remortgages no longer need to be blocked by red tape, and reducing term lengths to save on interest is now far simpler.
The FCA has maintained consumer protections, requiring lenders to offer advice where appropriate and uphold standards under the Consumer Duty. Guidance on interest-only loans has also been retired, signalling a shift toward outcome-based regulation.
Caution Still Applies
While these changes are largely positive, they come with risks. Easier credit could encourage overborrowing, raising concerns about negative equity or repayment stress if rates rise or incomes drop. Repossession numbers are low now, but may climb if affordability is overstretched.
Conclusion
These reforms are a major step forward, making home ownership and refinancing more accessible without sacrificing prudence. But they still demand informed decision-making.
At Rettie Financial Services, we see this as a prime opportunity for buyers and homeowners alike. Whether you’re stepping onto the ladder or looking to remortgage, the window is open. Expert guidance is key, and our mortgage advisers are here to help you unlock these benefits.
Book an appointment or call us on 03301 759 977 to explore your borrowing potential and make the most of this new mortgage landscape.