Borrowers shouldn't be over-burdened, says BDM
A proposed loosening of strict rules on mortgage lending needs to be carefully considered before any changes are made, to ensure customers are protected, suggests Skipton Building Society business development manager, Isha Thomson.
Thomson (pictured left) – who is responsible for Skipton’s business in Scotland – believes the financial well-being of first-time buyers is of particular concern, and urges ministers both north and south of the border to consider new initiatives to help people buy property.
The UK's financial regulator the Financial Conduct Authority (FCA) says it will investigate ways to simplify rules brought in following the 2008 financial crisis. The government wrote to the UK’s main regulators last month inviting them to suggest ideas for reform which could boost economic growth.
It has written to Prime Minister Keir Starmer and Chancellor Rachel Reeves setting out its thoughts on how regulators and regulation can support growth. It’s expected that any changes would mean reviewing and striking a balance between protecting borrowers and improving access to home loans.
The FCA references current low numbers of borrowers missing repayments, or having homes repossessed, as evidence to question whether the rules are too strict. The letter from FCA chief executive, Nikhil Rathi, stated: “We will begin simplifying responsible lending and advice rules for mortgages, supporting homeownership and opening a discussion on the balance between access to lending and levels of defaults."
Responding to the latest suggestions of loosening mortgage rules, Skipton’s Thomson told Mortgage Introducer: ”It’s very difficult to say whether I would support it or not. After everything that happened in 2007/ 2008, we do need to be careful that we are very much lending responsibly. We want to make sure we're making the right decision for these customers, particularly with first-time buyers.
“I think more needs to be looked at in terms of what would the end repercussions be, how much success would we get from that, but always with a hat on of lending responsibly. We need to have a really good look at doing anything as big as this, in terms of relaxing rules and making any significant changes.”
She continued: “There needs to be work done in the background to make sure that nobody falls foul, that we don't overburden or add unnecessary debt to customers who maybe can't support it in the long run.”
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Thomson acknowledged a ‘massive housing shortfall’, not just in Scotland but across the UK.
“There needs to be more government support, more government schemes to help first-time buyers and stimulate the market,” she said. “There’s a lot of shared ownership down south, in England, but that’s not that common here. I think we may be missing a trick.”
Meanwhile, Mark Hollands, head of sales & distribution at Bluestone Mortgages, said he would welcome a relaxation of the rules, and pointed to the lender’s own research that found that nearly two fifths - 37% - of first-time buyers viewed affordability as their main barrier to homeownership. A third - 34% - are struggling to raise a large enough deposit, its data suggests.
“For too long, lending rules have been too restrictive, making getting onto and up the property ladder out of reach for many, if they can afford the monthly repayments,” Hollands said. “We hope to see measures from the government not only focus on easing affordability to open up the market to thousands more participants, but also increasing support for those with small deposits.
“Looking ahead, we would like to see greater collaboration between the government and the mortgage industry to support the root causes of the housing crisis. This includes easing the affordability pressures that prospective buyers face as well as providing innovative solutions that help buyers get onto the property ladder.”
Some analysts believe losing restrictions could prove more beneficial in certain parts of the country. Mortgage regulations stopped a house price boom and bust when rates jumped in 2022/23, noted Richard Donnell, executive director at property platform Zoopla. Regulators are likely to be resistant to big change as it would push prices higher, he believes. “There is scope for some modification in the rules but how transformational is far less clear,” Donnell added.
