Santander Loosens Mortgage Lending Rules to Aid Borrowers

In a significant move for prospective homebuyers, Santander has announced a relaxation of its mortgage lending rules. This initiative comes as the lender aims to address ongoing affordability challenges in the housing market.

Starting Friday, the UK’s fourth-largest mortgage provider will adjust its stress-testing rates, allowing many borrowers to access loans ranging from £10,000 to £35,000 more than previously possible. The change follows increasing pressure from the government and the Financial Conduct Authority for banks to adopt more flexible lending practices.

Previously, lenders were required to test whether borrowers could afford a rate approximately one percentage point above the bank’s standard variable rate. In contrast, Santander will now reduce this stress-test rate to between 6 and 7 percent. Given that fixed mortgage rates currently stand around 4 percent, this adjustment could enable potential buyers to consider properties previously beyond their reach.

Andrew Montlake, chief executive of Coreco mortgage brokers, welcomed the changes as a sensible approach to addressing long-standing affordability issues. He remarked that the easing of restrictions should assist more borrowers without significantly increasing risk levels.

The decision aligns with recent guidance from the FCA, encouraging banks to adopt a more lenient stance on stress testing. Regulators are keen to promote economic growth and support the government’s objective of enhancing home ownership across the country.

Despite concerns that altered stress-testing rules might lead to a rise in mortgage defaults, Santander has assured that it will maintain caps on borrowing limits. This cautious approach aims to balance the need for accessibility with financial stability.

Email alerts have been sent to customers, prompting them to update their payment details via their accounts, ensuring they can maintain their subscriptions without termination. With this proactive stance, Santander is clearly positioning itself as a leader in the evolving landscape of UK mortgage lending.