Santander Eases Mortgage Lending Criteria for First-Time Buyers

In a significant move, one of the UK’s largest mortgage lenders, Santander, has announced a relaxation of its lending criteria for first-time buyers. This change means that couples earning a combined income of £49,500 may now be able to borrow up to £210,352 on a two- or three-year fixed-rate mortgage, representing an increase of almost £14,000 compared to previous limits.

These adjustments follow the Financial Conduct Authority’s (FCA) recommendations aimed at encouraging lenders to reassess their affordability assessments. Santander’s revision comes as part of a broader effort to increase access to mortgages, ensuring that borrowers are not unduly restricted from obtaining loans that they can afford.

Key to Santander’s strategy is the reduction of its stress testing rate, a process meant to assess whether borrowers can manage repayments, even if interest rates rise. Previously, the bank assessed repayments at a rate of one percentage point above its standard variable rate of 6.75%. The new regulations now allow for a stress test rate between 6% and 7%, effectively broadening the scope for lending.

A couple looking to move up the housing ladder, earning a collective £63,500, may now borrow £305,326 on a five-year fixed-rate mortgage, almost £21,000 more than before. The changes specifically benefit existing Santander customers wishing to expand their borrowing capacity. David Morris, head of homes at Santander UK, emphasised the bank’s commitment to facilitating home ownership, acknowledging the persistent challenges posed by affordability constraints.

While this initiative is expected to make home purchases more feasible for many buyers, it is essential to note that loan-to-income caps remain in place. This means that while there are opportunities for increased borrowing, there will still be limits based on individual income levels. Industry experts view this change positively, noting that it could help many prospective buyers who previously found homes just beyond their financial reach.

The relaxation of mortgage rules reflects an evolving landscape in the UK housing market, where accessibility and affordability continue to be key concerns for potential homeowners. As Santander leads the way, other lenders may soon follow suit in refining their lending practices.