More people can get mortgages under comfortable new plans – but home prices could rise

The idea from the Bank of England to relax tough mortgage rules would make it easier for first-time buyers to get a loan approved, but could also mean an increase in property prices.

House prices could rise if the Bank of England relaxes its current tough rules on allowing borrowers Mortgage .

Currently, anyone who takes out a mortgage must prove to a lender that they can still pay off the loan if interest rates rise.

To prove it, they have to show they can pay a ‘reverse rate’ – usually 3% higher than the mortgage lender’s standard rate of change.

The idea is that it protects consumers.

If prospective homeowners can’t afford it, the rate of return they’ll face will lag on mortgage payments if interest rates rise – and possibly lose their home to the bank.

But this tough test makes it hard for many to climb the housing ladder.

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Now, the Bank of England is consider loosening the rule, according to The Telegraph.

This will allow people to get mortgages more easily – but experts say it could also mean higher house prices.

Lewis Shaw, founder of Shaw Financial Services, said: “If the Bank of England revises its mortgage affordability, this could be great news for buyers as it means people will be able to borrow more than.

“Of course this is always a double-edged sword. On the one hand, it means that people will be more likely to buy bigger or better properties in the areas they like.

“But it will also cause home prices to rise further and faster, which is the last thing we need at this point, and could easily lead to a housing bubble that easily turns into a real estate crash.”

The Bank of England would not comment.

The The average house price in the UK has increased by £1,691 a month since the UK first started locking down accounts in March 2020, according to one indicator.

Halifax said property values ​​hit a new record high of £272,992 in November, with apartments also rising in price in recent months.

Chief executive Russell Galley said: “Since the pandemic broke out in March 2020 and Britain first began shutting down, house prices have risen by £33,816, or £1,691 a month.”

Quarterly house price inflation was at its strongest since 2006, with an increase of 3.4%.

Prices were up 1.0% month-on-month in November and up 8.2% year-over-year.

Galley continued: “Market performance continues to be underpinned by a shortage of available assets, a strong labor market, and stiff competition among mortgage providers that keep interest rates close.” with historic lows.”

Halifax says the median house price in Wales has surpassed £200,000 for the first time. Wales also had its strongest annual home price inflation in November, at 14.8%.

How much does it cost to buy in your area?

Here are the average UK house prices in November, according to Halifax and year-on-year growth:

• East Midlands, £223,198, 8.2%
• East of England, £317,522, 7.4%
• London, £521,129, 1.1%
• North East, £157,100, 7.5%
• North West, £209,287, 11.4%
• Northern Ireland, £169,348, 10.0%
• Scotland, £191,140, ​​8.5%
• South East, £370,171, 7.6%
• South West, £283,734, 10.0%
• Wales, £204,148, 14.8%
• West Midlands, £231,493, 7.9%
• Yorkshire and Humber, £190,263, 8.8%