In an effort to boost property prices, the Bank of England may ease mortgage regulations.
Next month, Governor Andrew Bailey will make it clear to the central bank whether large-sized mortgages can be increased by lenders.
Limitations on the amount that banks will lend to home-owners who have a household income greater than 4.5 times are made by banks. They must account for no more that 15% of new bank loans.
The Bank of England mentioned the rules last month in an updated statement. It stated, “There has been very little evidence of either a decline in lending standards nor a material rise in the number of households with high debts.”
Stamp of approval: Banks are limited in the home loans they can give to borrowers who need more than 4.5 times their salary
The rules – called ‘stress tests’ – were drawn up after the financial crisis and are aimed at ensuring that banks are resilient enough to withstand borrowers running into financial difficulty after a jump in interest rates.
Ray Boulger, a mortgage broker at John Charcol, said: ‘I think there’s a good argument for the rules changing – especially given that they came into force in 2014.
‘It would mean that people who can’t afford their first property or couldn’t borrow enough would have a chance to get on the ladder. The theory is that this will cause an increase in house prices.
Many banks and building societies now offer larger loans. Nationwide said in April that it was increasing the amount first-time buyers could borrow to 5.5 times their annual income – although borrowers would need to lock in for at least five years.