The lender is the first to reduce its mortgage affordability rules in response to a call from the financial regulator, the Financial Conduct Authority (FCA), to lessen borrowing restrictions.
Santander said from today it had reduced residential affordability rates by up to 0.75% – the lowest levels since 2022.
This means ‘many customers’ applying for a residential mortgage with the lender will be able to borrow between £10,000 to £35,000 more today than they would yesterday.
This does, however, depend on customers’ individual circumstances and would be subject to checks, such as the loan to income ratios involved.
David Morris, head of homes, Santander UK said: “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.”
Following the financial crisis in 2008, strict lending rules were introduced to prevent borrowers falling into difficulties.
Under these regulations, when a mortgage lender assesses a potential borrower’s income they look at how they might afford the mortgage were interest rates to increase in future.
But, with interest rates falling, the FCA thinks the current approach to this stress testing might be restricting access to mortgages for many.
Santander’s lending shift in response to the FCA has raised some concerns there could be a return to the days of reckless lending.
Emma Jones, managing director at Whenthebanksaysno.co.uk, speaking to the Newspage agency, said: “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.”
But others welcomed a less cautious approach from lenders. Katy Eatenton, mortgage & protection specialist at Lifetime Wealth Management, also speaking to Newspage, said: “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.”
