Bumper mortgages return as banks loosen lending rules
A couple with combined income of £60k can borrow £90,000 more than last year
16 February 2021 • 6:00am
Aspiring homeowners can now borrow much more after banks raised the cap on mortgage sizes. Lenders have begun to relax affordability rules for borrowers after tightening them last year amid worries over the economy s health.
High street banks including NatWest, Lloyds and HSBC will once again offer mortgages worth five times a borrower s yearly salary, while Santander and Barclays now lend up to 5.5 times an applicant s income.
For most of last year borrowers were only eligible for loans worth up to 4-4.5 times their income.
The number of products available has also risen in the past year, from 74 in February 2020 to 109 today.
Eleanor Williams, financial expert at Moneyfacts, says: These positive shifts in both the number of lenders and Rio deals are great news for older borrowers.
Why are these products becoming more popular, and when should you consider getting one?
How does a Rio mortgage work?
Rios are similar to normal interest-only mortgages, in that you agree only to pay off the interest each month for the term of the mortgage, and then pay the rest of what you owe when that period comes to an end.
Mortgage approvals for house purchases hit their highest level since the financial crisis last year, as the stamp duty holiday and socialising restrictions kept buyers engaged with their search for a new home.
There were a total of 103,400 approvals for new mortgages in December 2020, bringing the total for 2020 up to 818,500, according to the latest Bank of England figures.
This was the largest number in any one year since 2007 and a 4 per cent increase on 2019 when there were around 789,000 approvals.
More buyers secured a mortgage for a new home last year than in any year since 2007
This happened despite the fact that the housing market shut down for eight weeks during the first national lockdown.
UK mortgage approvals reach 13-year high
Lenders in the UK approved more than 100,000 new mortgages in November, the most since the start of the financial crisis in August 2007, according to the Bank of England.
The housing market collapsed early in the Covid-19 pandemic in April and May when lockdown restrictions were first imposed. Home buying has increased since then, driven in part by a stamp duty holiday cutting the rate to 0% for all properties under £500,000 which is due to expire at the end of March.
Data from the Bank of England shows that lenders approved 104,969 mortgages in November, despite England being in a national lockdown for most of the month. Approvals rose from 98,338 in October.