Changes in the way lenders stress test borrowers for mortgages could lead to a huge jump in the amount of first-time buyers able to access the housing market, according to Savills.
Savills’ analysis found first-time buyer transactions could increase by up to 24 per cent over the next five years if lending rules continue to relax.
Following a change in Bank of England guidance in March, lenders are no longer required to stress test borrowers at the Standard Variable Rate plus 1 per cent.
Stress testing, which became common after the 2008 financial crash, refers to the hypothetical higher mortgage rates lenders ‘test’ borrowers against when they apply for financing.
While designed to prevent homeowners taking out unaffordable loans, some industry experts have said stress rates are too high and prevent those who could comfortably afford mortgages from getting one.
Several lenders have already modified their mortgage requirements in the wake of the Bank of England’s change.
Halifax eased its stress tests in April, while Nationwide adjusted its stress rates down earlier this month.
However, Savills cautioned that the overall effect of easier access to mortgages will depend on how much house prices rise.
“The more increased borrowing capacity impacts prices, the less impact there will be on transactions,” Lucian Cook, head of residential research at Savills, said.
The property giant warned that a 24 per cent rise in the number of first-time buyers could cause house prices to rise by 7.5 per cent on top of additional forecasts.
“The current uncertain economic outlook is likely to hold back buyer confidence and willingness to take on substantially more debt in the short term,” Cook added.
“But in the medium to long term, the market would feel the knock-on impact of a widening pool of buyers. This will be good news for housing delivery but it’s unlikely to be enough to allow the government to hit its housebuilding targets.”
