Rachel Reeves is set to press ahead with sweeping mortgage reforms, despite warnings that it could “go wrong” and lead to a surge in repossessions. The Chancellor is expected to announce in her Mansion House speech changes which will make it easier for first-time buyers to get on the housing ladder and cut red tape.
It will allow renters with a strong history of timely payments to use their track record to show lenders how much they can afford to borrow, potentially without the need for a deposit. She looks set to press ahead with the changes despite the head of a City watchdog warning months ago that the push could “go wrong” and result in a surge of repossessions, reports the Telegraph.
Nikhil Rathi, chief executive of the Financial Conduct Authority (FCA), warned in January that easing regulation could have a negative effect on the system, with no guarantee that everybody will “play completely by the rulebook” adding that more risk would increase the likelihood of repossessions.
He said: “When the mortgage charter came in last year, pretty much every major party said keep repossessions down, and we did.
“That is not consistent with relaxing the lending standards.”
The mortgage charter is a series of measures taken by lenders and the government to provide support to mortgage holders facing increased interest rates.
It comes in the week that Threadneedle Street announced it would change the rules for first time buyers by changing the cap on the amount of money people can borrow. The bank believes that it could allow as many as 36,000 people to get on the housing ladder that otherwise might be unable to do so.
Nationwide, Britain’s biggest building society, will also allow an additional 10,000 people to borrow after reducing the minimum mortgage requirement from £35,000 to £30,000.
Reeves will also announce a government-backed permanent mortgage guarantee scheme for both home movers and first-time buyers.
Emma Reynolds, Economic Secretary to the Treasury, told parliament in June that “the government will be launching a new mortgage guarantee scheme in July 2025, delivering on our manifesto commitment to support homebuyers with smaller deposits across the UK”.
She said the scheme would “incentivise and sustain availability of 91% to 95% loan-to-value mortgages through the economic cycle by providing lenders with a government-backed guarantee”.
The Chancellor will also tell those in her annual speech that financial services are “at the heart of the Government’s growth mission…recognising that Britain cannot succeed and meet its growth ambitions without a financial services sector that is fighting fit and thriving”.
It is unclear how much detail will be shared in the speech but it is expected to include changes to the Bank of England and FCA to give greater flexibility to the sector.
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