Rachel Reeves eyes boost for first-time buyers with mortgage reforms
Rachel Reeves will today unveil a fleet of reforms in a bid to boost home ownership as she plans to slash ‘financial red tape’.
Speaking in Leeds ahead of her Mansion House address, the Chancellor will announce plans for the Prudential Regulation Authority (PRA) to increase high loan-to-income mortgages (over 4.5 times a buyer’s income) following recommendations from the Bank of England.
The Treasury expects the move alone to create up to 36,000 additional mortgages for first-time buyers in the first year.
Nationwide – the UK’s biggest building society – is set to expand its first-time buyer mortgages support on the back of the changes.
The mutual will widen access to its ‘Helping Hand’ mortgage through cutting the eligibility criteria to support more buyers. This includes single applicants with a salary of £30,000, down from £35,000 and joint applications with a combined salary of £50,000, down from £55,000.
Nationwide said the change would support an extra 10,000 first-time buyers annually.
Henry Jordan, Nationwide’s director of home, said: “The PRA’s announcement unlocks lending for first-time buyers at what remains a difficult time for home ownership. It has given us the confidence to respond quickly by relaxing our lending criteria”.
FCA mulling mortgage overhaul
This comes alongside the creation of a permanent mortgage guarantee scheme, following on from Labour’s manifesto pledge to ensure high loan-to-value mortgages continue to be available in times of uncertainty.
The Financial Conduct Authority laid out plans earlier in the year to review lender’s risk-taking as part of its drive to boost home ownership. An update to “responding lending rules” was cited as a key area by the regulator, as it looks to broaden sustainable home ownership.
The changes, packaged as the Leeds Reforms, will be debuted ahead of the Chancellor’s Mansion House speech on Tuesday evening.
In her speech, Reeves is expected to tout financial services role in driving the government’s economic growth ambition.
Official figures from the Office of National Statistics showed the UK economy shrunk 0.1 per cent in May, which followed on from a 0.3 per cent contraction in April.
But first quarter growth came in at 0.7 per cent, providing Reeves a modest boost.