Bank of England considering easing mortgage rules

Bank of England considering easing mortgage rules in move that could boost house prices










The Bank of England is considering easing mortgage rules in a move that could boost house prices. 

The central bank, led by Governor Andrew Bailey, will announce next month whether lenders can increase the volume of large mortgages they dish out. 

Banks are limited in the home loans they can give to borrowers who need more than 4.5 times their salary. These customers must represent no more than 15 per cent of the new loans that banks issue. 

The Bank of England referenced the rules in an update last month, saying ‘there has been little evidence of a deterioration in lending standards or a material increase in the number of highly indebted households’. 

Stamp of approval: Banks are limited in the home loans they can give to borrowers who need more than 4.5 times their salary

The rules – called ‘stress tests’ – were drawn up after the financial crisis and are aimed at ensuring that banks are resilient enough to withstand borrowers running into financial difficulty after a jump in interest rates. 

Ray Boulger, a mortgage broker at John Charcol, said: ‘I think there’s a good argument for the rules changing – especially given that they came into force in 2014. 

‘It would mean that people who can’t afford their first property or couldn’t borrow enough would have a chance to get on the ladder. In theory, this would push up house prices.’ 

A number of banks and building societies have begun offering larger loans. Nationwide said in April that it was increasing the amount first-time buyers could borrow to 5.5 times their annual income – although borrowers would need to lock in for at least five years.

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