The mortgage industry broadly welcomed the Chancellor’s Mansion House speech last night, where she said: “In too many areas, regulation still acts as a boot on the neck of businesses”.
Rachel Reeves (pictured), in comments to the City, said her ongoing reforms across mortgage lending, retail investment, capital markets, regulation, pensions and banking amounted to “the most wide-ranging package of reforms to financial services regulation in more than a decade”.
She added that the Financial Policy Committee’s announcement yesterday to lift loan-to-income limits on mortgages “means tens of thousands more people could be able to get a mortgage in the next year alone”.
She has asked the Financial Conduct Authority to review how the Consumer Duty applies to wholesale financial firms to see “whether it unduly affects wholesale activity”.
However, Reeves welcomed that the Financial Policy Committee will review “the overall level of bank capital needed for UK financial stability”, which will report back to her by the end of the year.
She also committed the government to “meaningful reform” of UK bank ringfencing, which separates lender’s retail and investment operations.
Banks have long complained that this leads to pools of underused capital.
Nationwide chief executive Debbie Crosbie says: “The Chancellor has set out an extensive package of pro-growth reforms that will be well received across UK financial services.
“This includes welcome news for the housing market, with the Chancellor confirming plans for greater flexibility in higher loan-to-income lending.”
Santander UK head of homes David Morris also welcomed the package, adding that the bank could lend to 5,000 more first-time buyers given the easing of loan-to-income limits for large lenders.
This comes after Nationwide said it had expanded its Helping Hand mortgage yesterday, which is aimed at first-time buyers and lends at up to six times’ income. The mutual said this would allow it to underwrite an extra 10,000 FTB loans a year.
Santander’s Morris adds: “Given our focus on the FTB market, we have further updates in train, which could support 5,000 more first-time buyers, and we’ll continue to look at additional ways we can help aspiring homeowners, given the potential to go above the 15% limit.”
However, Santander’s Morris goes on to point out that Labour’s focus on building new homes was key to unlocking the housing market.
Morris says: “While the changes to loan-to-income flows help ensure there remains a strong pipeline in terms of demand, supply must also keep apace, and we welcome those initiatives that respond to the increasing demands that a growing population has on housing stock, such as the government’s 1.5 million new homes ambition, which will play a vital role ensuring there remain sufficient properties.”
Mortgage Advice Bureau deputy chief executive Ben Thompson hopes to see more help for renters who want to own their own home later in the year.
The Financial Conduct Authority is carrying out its second review into the mortgage market, which is due to report in the autumn.
Thompson says: “Although it was disappointing not to see more support for the rental market in the form of track record payments, we’re hopeful for further developments around this in autumn.
“Our recent research underscores the significant potential and strong purchase appetite from the rental market, with 56% of UK renters stating they’d buy their first home if the mortgage repayments aligned with their rent.”
However, Hargreaves Lansdown head of money and markets Susannah Streeter warns that the hard work to compete against financial markets across the world that are all looking to shake off more than a decade of anaemic growth.
Streeter says: “By fostering a retail investment culture, making UK markets a more attractive place for listings, and helping UK companies access vital funding, these reforms will help build a more dynamic and equitable financial ecosystem.
“It’s still not going to be easy to compete against the might of New York, but with continued collaboration across the industry, these changes should provide more fuel to power an engine of growth and innovation.”
