How Looser Affordability Rules Could Expand Home Ownership in the UK
In a move that could reshape the UK housing market, mortgage lenders are beginning to loosen the affordability rules that have long limited how much prospective buyers can borrow. As interest rates stabilize and the cost of living begins to level off, the Financial Conduct Authority (FCA) has effectively encouraged lenders to relax some of the strict stress-testing requirements that have made it harder for first-time buyers and “second steppers” to access home financing.
This shift signals a potential expansion in home ownership, giving many households a new path onto the property ladder. But the strategy is not without controversy: some market experts warn it could fuel faster house price inflation and lead to riskier lending practices reminiscent of the 2007–08 financial crisis.
Why Are Affordability Rules Changing?
Historically, mortgage lenders in the UK have applied stringent stress tests to assess whether a borrower could continue to meet their mortgage payments if interest rates were to rise sharply. These tests were designed to protect consumers and banks following the global financial crisis. But as rates fall and inflation slows, the FCA has signaled that the current approach may be too restrictive.
In its recent guidance, the FCA stated that “the way some lenders were doing their stress testing may be unduly restricting access to otherwise affordable mortgages.” The regulator’s nudge has opened the door for lenders to adjust their criteria without exposing themselves—or their borrowers—to excessive risk.
Santander Leads the Way
Santander, one of Britain’s largest mortgage providers, was the first major lender to respond. The bank loosened its affordability checks, effectively allowing borrowers to access between £10,000 and £35,000 more than they previously could.
For example:
- A first-time buyer couple with a joint income of just under £50,000 seeking to buy a £260,000 property may now be eligible to borrow £210,000, up from £196,000.
- A second-stepper couple with two children, earning £63,500 and aiming to buy a £425,000 home, may now be able to borrow £305,000, up from £284,000 on a five-year fixed-rate deal.
Rachel Geddes, Director at Mortgage Advice Bureau, welcomed the change.
“We’re hopeful that more lenders will follow suit. We’re excited to see what lenders are going to be doing over the coming weeks,” she said.
Indeed, specialist lender Precise has already reduced its own stress-testing threshold, and industry watchers expect more high street banks to follow Santander’s lead.
How This Could Affect Buyers
For first-time buyers, looser affordability checks could make the difference between being locked out of the market and securing a home. The extra borrowing capacity could help them compete in a rising market, especially as house prices continue their upward trend.
The average UK home cost 3.9% more in March 2025 than a year earlier, according to Nationwide, and although mortgage rates have dipped slightly—a new five-year fixed deal now averages 5.18% (down from 5.24% in January)—they remain far higher than the sub-3% deals common just a few years ago.
With household budgets still stretched due to lingering cost of living pressures, the ability to borrow more could provide crucial flexibility.
“Changes will bring home ownership within the reach of more people,” said one mortgage broker.
But Could This Backfire?
While increased lending capacity is good news for many, some economists and housing analysts are cautious.
A key concern is that if more people are suddenly able to borrow significantly larger sums, demand could spike, pushing house prices up even faster. That could offset any benefit the looser rules provide and worsen affordability for lower-income buyers.
There’s also the fear of slipping into over-lending territory. Critics argue that the UK must avoid repeating the mistakes that led to the 2007–08 crash, when lax lending standards allowed consumers to borrow more than they could safely repay—ultimately triggering widespread defaults.
Are Safeguards Still in Place?
According to Chris Sykes, Technical Director at Private Finance, there’s less risk today thanks to continued use of income multiples and other affordability metrics that prevent excessive borrowing.
“Lenders are fairly safe making these changes. Other measures, such as income caps, remain in place,” said Sykes. “Plus, many borrowers are being sensible—they’re focusing more on their maximum comfortable monthly payment than on maxing out what lenders are willing to offer.”
This personal discipline, combined with responsible lending policies, may help maintain a healthy balance between increased access and financial stability.
Implications for the Housing Market
The shift in affordability rules could have wide-ranging effects:
1. Boost for First-Time Buyers and Young Families
The extra borrowing power could unlock home ownership for tens of thousands who were previously priced out, particularly in high-cost urban areas.
2. Increased Market Activity
Spring and summer are traditionally busy seasons in the housing market. The timing of these changes could stimulate a wave of new applications, increasing sales volumes and potentially reviving sluggish segments of the market.
3. Upward Pressure on Prices
With more people now able to afford homes in their desired price range, competition for limited stock may push prices higher—especially in the £200,000–£400,000 bracket where most buyers are concentrated.
4. Potential Rental Market Impact
If more renters can now qualify for mortgages, this may ease demand in the rental sector slightly, possibly slowing the sharp rental inflation seen in recent years.
Final Thoughts: A Step Forward, With Caveats
The easing of affordability stress tests marks a notable policy shift in the UK mortgage market. By unlocking greater access to credit, the FCA and lenders are working to support home ownership at a time when rising costs have made that goal increasingly elusive.
But the benefits come with risks. Without corresponding efforts to increase housing supply, and with many households still battling economic uncertainty, the danger remains that demand will outpace availability, pushing prices higher and straining affordability once again.
To make home ownership more accessible sustainably, the government, regulators, and lenders will need to work in tandem—balancing opportunity with prudence, and focusing not just on how much people can borrow, but on whether housing is truly affordable in the long term.
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