FIRST-TIME buyers have been given another boost after a fourth major lender slashed its affordability rules.
Barclays has shaken up its mortgages, meaning buyers can borrow more.
1
The bank and lender has reduced its stress tests for both buyers and those remortgaging by 0.5%.
Mortgage stress testing is done by lenders to figure out if you can afford to meet your payments under financial strain.
For example, they test to see if you could afford payments should interest rates go up or your income drops.
If stress tests are reduced, it means buyers and home movers are able to borrow more.
Barclays said the changes to its stress testing mean a family could potentially borrow up to £30,750 more, depending on their circumstances.
Lee Chiswell, head of mortgages at Barclays, said: “We are delighted to increase the amount we can lend to customers looking to buy a home.
“We know there are many challenges facing people right now, whether it’s a first-time buyer trying to pull a deposit together or a family looking to move house.
“Improving our affordability rates could help make many customers’ dream home a reality, while continuing to have strong measures in place to ensure that they can make payments on their mortgage.”
The latest move from Barclays comes after three other lenders reduced their stress tests.
At the end of last month, HSBC shook up its affordability rules, meaning buyers can borrow £39,000 more on average.
Earlier in April, Halifax also made changes to its affordability rules, reducing the stress rates used in its standard affordability calculation and on its five-year fixed-rate mortgages by 0.5%.
The lender said it means a typical household of two adults with two children and an income of £75,000 can now borrow £38,000 more.
In March, Santander was the first to make changes to its stress tests, reducing rates by 0.75%.
What is happening with mortgages?
Mortgage rates have been falling steadily across the UK following a number of Bank of England (BoE) base rate cuts.
Trump’s “Liberation Day” blitz of tariffs also led to a number of lenders slashing interest rates below 4%.
The base rate is the rate the BoE charges to high street banks and lenders when they borrow money.
If it goes up, it means mortgage rates tend to rise too, as well as savings rates. When it falls, it sees the opposite happen.
The base rate currently sits at 4.25%, having been lowered from 4.5% earlier this month, and down from 5.25% in summer last year.
According to Moneyfactscompare.co.uk, the average two-year fixed-rate mortgage is 5.11% as of today, compared to 5.93% a year ago.
Why are mortgage rates dropping?
Consumer reporter Emily Mee explains how global economic turmoil is contributing to lower mortgage rates…
Mortgage rates in the UK have been dropping after US President Donald Trump imposed huge tariffs on dozens of countries in early April.
The move sent stocks plummeting and created uncertainty for economies across the globe – but an unexpected side effect of this is a boost for British home buyers.
That’s because the turmoil has led to markets now expecting more Bank of England base rate cuts.
The Bank of England’s base rate helps to influence the rates set by mortgage lenders.
Markets had priced in two base rate cuts this year, but they’re now expecting the Bank will need to cut rates four times to avoid an economic downturn caused by the global uncertainty.
Nicholas Mendes, mortgage technical manager at John Charcol, said if this happens we can expect the base rate to fall from 4.5% to 3.5% this year.
Things began to look uncertain again after Mr Trump announced a 90-day pause on the tariffs.
This could have led to lenders holding back and waiting to see what happens before slashing rates.
But several ended up moving to slash rates to below 4% regardless.
Brokers will now be keeping an eye on the swap markets.
That’s because lenders use swap rates to determine how they should price their mortgage rates.
Meanwhile, the comparison website said the average five-year fixed-rate mortgage sits at 5.07% today, compared to 5.50% a year ago.
More base rate cuts are expected this year, with the National Institute of Economic and Social Research forecasting two more 25 basis point cuts, which would see the base rate fall to 3.75%.
Any fall in the base rate will lead to mortgage rates falling further, which is a boon for home buyers or those remortgaging.
It’s worth bearing in mind, when your mortgage rate falls is dependent on the type you have.
Those on tracker and standard variable rate (SVR) mortgages tend to see their rates fall first.
However, if you’re on a fixed rate, you won’t feel the impact of any rate changes until your deal ends.
If you are coming to the end of a fixed deal, most lenders let you lock in a new rate up to six months beforehand, which can be worth doing.
If rates fall after you agree a new deal, some lenders will let you sign a new one at a lower rate.
Do you have a money problem that needs sorting? Get in touch by emailing money-sm@news.co.uk.
Plus, you can join our Sun Money Chats and Tips Facebook group to share your tips and stories
