Santander potentially offering borrowers up to £35,000 more after loosening mortgage lending rules
Borrowers could potentially secure up to £35,000 more when applying for a mortgage after Santander became the first major UK lender to loosen lending rules.
This move is the first from a big bank since the Financial Conduct Authority announced regulation changes earlier this month. Santander says its change means its residential affordability rates are the lowest since 2022. The bank says this is great news because it can say 'Yes' to more mortgage applications.
Generally, banks and building societies typically lend between four and six times a single or joint applicant's salary, depending on their credit record, income, and expenditures. Santander was already offering up to 5.5 times the salary for higher earners.
What has Santander changed?
- Standard affordability rate reduced by 0.75%.
- Pound for pound remortgages on a five-year fixed affordability rates reduced by 0.75%.
- Retained and not let property affordability rate reduced by 0.75%.
Santander has also reduced its existing customer affordability rate by 1.75%, allowing new and existing customers to borrow the same amount.
How much difference will Santander's mortgage affordability changes make?
The Financial Conduct Authority and UK Government are pushing for growth and mortgage affordability is an area they are focusing on. They know it is a real issue for many borrowers keen to get on the property ladder or move home. This change may mean Santander customers can borrow more, but other lenders may also make affordability improvements.
Santander said this meant many borrowers, depending on their earnings, could take out mortgages of between £10,000 and £35,000 more. For example, a couple earning £63,500 with two children looking to buy a £425,000 property would have previously been able to borrow up to about £284,728. Under the changes, they could borrow £305,326 — £20,598 more. This is according to figures in The Times.
At present borrowers are tested to ensure they can afford a rate about 1 percentage point above the bank’s standard variable rate of 6.75%, which is what homeowners fall into after a fixed deal ends. Santander’s stress rate will instead be reduced to about 6 to 7 per cent. Fixed mortgage rates are about 4.25% at the moment.
Do the lenders have different mortgage affordability rules?
Mortgage lenders often use different affordability calculations, meaning they offer borrowers different loan sizes. Trinity Financial's brokers search the market to help our clients secure sufficiently large mortgages at competitively priced rates.
Call Trinity Financial on 020 7016 0790 to secure a mortgage, book a consultation, or complete our mortgage questionnaire.
The information contained within was correct at the time of publication but is subject to change.
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