Lloyds Bank and Halifax loosens mortgage criteria

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Lloyds Bank and Halifax have increased mortgage lending rates from 4.49 times income to 5.5 times.

Analysis by Mojo Mortgages found that this has made mortgages more affordable for private buyers in 17 UK cities (21%), up from three (4%) previously.

For example, a prospective buyer earning £30,000 a year could potentially secure a mortgage of up to £165,000, compared with the previous limit of £135,000, at a ratio of 4.5.

John Fraser-Tucker, head of mortgages at Mojo Mortgages, said: “Our analysis of the UK’s 80 most populous cities shows a significant shift in the ease of buying a home.

“But it’s important to be aware of the risks. Higher borrowing amounts may enable more aspiring first-time home buyers to purchase their first home, but higher borrowing limits also mean higher monthly mortgage repayments. And with mortgage rates still significantly higher than a few years ago, it’s important first-time buyers make sure their payments are manageable.

“Increased borrowing capacity could also lead to higher house prices as demand increases, undermining the overall goal of home affordability for first-time home buyers.”

“Despite these challenges, the overall outlook is optimistic. Mortgage rates are starting to fall following the Bank of England’s recent base rate announcement and it is hoped that these changes will create a more favourable environment for first-time homebuyers.”

For married couples, 56 cities (70%) were below the previous mortgage-to-salary ratio benchmark of 4.5 before the change.

Now, 13 more cities have become liveable, resulting in 86% of cities and towns being liveable for couples on average salary.