Santander loosens affordability rules for borrowers | Personal Finance | Finance

Santander has reportedly made a groundbreaking move by becoming the first bank to ease its loan affordability criteria, enabling individuals to potentially borrow up to £35,000 more depending on their income.

This comes as the Government nudges regulators towards creating a growth-conducive environment and follows recent advice from the Financial Conduct Authority (FCA) to banks on supporting homeownership.

Chess Mortgages’ Founder Bob Singh stated: “In a brave move, Santander has loosened affordability criteria in line with the FCA’s wishes. Buyers previously struggling to achieve a certain borrowing level may now get the house of their dreams.

“With a base rate cut now not expected until the summer, this move will be welcomed by many to ensure the market maintains momentum after the stamp duty rush is over next week. The ability to borrow more could plug the gap and be the tonic the market needs until we see further rate cuts. Other lenders will surely follow suit.”

Meanwhile, R3 Wealth’s Independent Financial Adviser Riz Malik said: “This will provide a major boost for those looking to buy while we wait for further rate cuts from the hesitant Bank of England. While a lull in the market was expected following the stamp duty rush, Santander could have just reignited it.

“Santander could now be flooded with applications given their first mover advantage. Considering there were talks of Santander leaving the UK, they have firmly planted their flag. Others will surely follow.”

Katy Eatenton, a mortgage and protection specialist at Lifetime Wealth Management, remarked on Santander’s move: “This move by Santander could provide real momentum to the property market, especially if other lenders follow their example as you imagine they will. Though some will fear this could be an ominous step back towards the kind of lending that existed before 2008 and the Global Financial Crisis, I don’t think this is the case. Lenders have long memories and will be very wary of those dark days.”

Meanwhile, Emma Jones, managing director at Whenthebanksaysno.co.uk, shared her perspective: “This will no doubt offer a real boost to borrowers but we have to be careful that we do not revert to the Wild West that was the mortgage world in the years leading up to the Global Financial Crisis. More flexibility is welcome but it should not come at the cost of putting borrowers at risk.”

Craig Fish, director of Lodestone Mortgages & Protection, also commented on the matter, saying: “This is a sensible move by Santander, as lenders have been far too cautious in recent times. The expectation is that rates are on a downward trajectory so it seems excessive to be stress testing at rates which are unlikely to be seen anytime soon, unless something catastrophic happens. I expect other lenders to follow suit, but I don’t expect this to result in a flood of applications to the market.”

Iain Swatton, director at Exemplar Financial Services, has welcomed Santander’s decision to relax its affordability rules. He said: “Santander’s move to loosen affordability rules is welcome news for borrowers, offering a much-needed boost to affordability in a market where rising house prices and stubborn interest rates have made it increasingly difficult to get on the ladder or move up it. This isn’t a return to reckless lending, far from it.

“Lenders like Santander will be closely monitoring borrower conduct to ensure sustainability. If anything, this is a sensible step towards recalibrating the market. There will always be those who err on the side of caution, but measured risk is necessary to drive growth and accessibility. Hopefully, other lenders will follow Santander’s lead, making it easier for more people to achieve their homeownership goals.”

David Morris, Santander UK head of homes, also commented on the changes. He stated: “Helping customers achieve their homeownership dream is a key priority for Santander, but we know that affordability constraints continue to bite.

“We’re thrilled to be the first major lender to respond to the updated FCA guidance, alongside introducing a range of reduced mortgage interest rates today, fulfilling our role as a responsible lender while helping more customers to borrow what they need to release their home aspirations.”