Halifax is helping customers borrow more to get on the property ladder as other major lenders cut their rates
The UK’s biggest mortgage lender is helping to give borrowers more money to get on the property ladder – while several providers have also cut their rates.
Halifax is the latest provider to offer improved borrowing on 5-year fixed mortgage products, boosting the potential by up to £38,000 and helping borrowers to secure larger mortgages based on their incomes.
Stress tests are used by lenders to measure borrowers’ abilities to manage a loan if interest rates are higher when they come to the end of their fixed rate period.
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By adjusting their stress tests, it means buyers or those moving will be able to borrow more than they can currently, with Halifax suggesting it means typical customers could see rises of around 13 per cent to the maximum loan available.
For example, one change is that those looking for a five year fixed deal will see a stress test of 4.5 per cent, when it was previously 5 per cent, meaning they have to prove they can afford this increased interest rate in future.
Aaron Strutt from brokers Trinity Financial said: “This is a significant change from Halifax that will make it easier for people to borrow more money to get on the property ladder, remortgage, or move home.
“The current tight mortgage affordability stress tests are a real issue meaning that many potential borrowers are being told they cannot afford mortgages when they probably can.”
However, there can are risks associated. For example, those who are then able to borrow more could see higher payments, which should also be factored in.
It comes as there are more low-deposit mortgages to choose from than at any time since the financial crisis of 2008, according to financial information services firm, Moneyfacts.
It said the number of 5 per cent deposit loans is now at 442, the highest point in 17 years while the number of 10 per cent loans is at 845.
Santander recently made similar affordability changes, which experts believe mean other lenders will probably ease their lending rules as well.
Mr Strutt added: “There are lots of schemes helping first-time buyers and higher earners to get more generous mortgage loan sizes, but in many cases, families struggle to borrow the amount they need.
“Many lenders want to issue more generous loan sizes, but the affordability rules have made it difficult. The new government has clearly changed something.”
Rachel Springall, Finance Expert at Moneyfacts, said: “The flourishing choice of low deposit mortgages will no doubt be welcomed by borrowers who are either looking to remortgage or are a first-time buyer.
“The Government has been clear that it wants lenders to do more to boost UK growth, and so a rise in product availability for aspiring homeowners is a healthy step in the right direction.”
However, she added “there is still much more room for improvement” as the choice of deals for those with 5 per cent deposit or equity represents just six per cent of all deals available to borrowers across fixed and variable mortgages.
Mortgage lenders cutting rates
At the same time, several major lenders have cut their mortgage rates including Santander who is bringing back its a rate of 3.97 per for home movers wanting a two year fix and a rate of 3.99 per cent for home movers with a three year fix.
It is available to those with a 40 per cent deposit or equity.
HSBC, Co-op and Gen H. HSBC and Co-op also said they will announce their new rates tomorrow (16 April).
Smaller lender Gen H has cut its two year rates for those with 15 per cent deposit or equity by 25 basis points while three and five year rates, again with 15 per cent deposit, have been reduced by 18 basis points.
It follows on from Barclays who cut rates to as little as 3.99 per cent for both two and five year fixes and those with a 40 per cent deposit.
Coventry Building Society also reduced its mortgage rates last week with a two year fix of 3.89 per cent although this is no longer available.
Justin Moy, Managing Director at EHF Mortgages, said: “Plenty of positive news from some key mortgage lenders with better deals available for those moving home and those looking for a new deal on their existing mortgage.
“Rate improvements reflect some Swap market improvements, combined with healthy competition, which can only be good news for borrowers.”
Fixed mortgage prices are heavily based on swap rates, which follow long-term predictions for where the Bank of England base rate will go in the future.
Swaps have fallen recently in light of Trump’s widespread tariffs with economists predicting that the Bank will cut interest rates by more than expected this year to avoid an economic downturn.
The average two and five-year fixed rates are currently 5.32 per cent and 5.18 per cent, respectively.
