Mortgage rule change could unlock higher value property chains

Irwin Mitchell expert says greater lending flexibility could help asset-rich buyers but warns it may push up prices.

Plans to relax mortgage lending restrictions could unlock transactions across the housing market, including higher-value property chains, according to Irwin Mitchell.

The Bank of England is reportedly considering raising the threshold at which mortgages are classed as high loan-to-income lending from 4.5 to five times household income.

The move could particularly benefit entrepreneurs, business owners and senior professionals whose overall wealth is not always reflected by a conventional salary.

Helen Hutchison, a residential property partner at Irwin Mitchell, said:

 

“This has the potential to benefit many property purchasers, not only first-time buyers. Some high-net-worth borrowers have significant assets, but their income may come from a mixture of salary, dividends, bonuses and investments.

 

“Greater flexibility could help them fund a move without selling investments or taking money out of a business. It could also unlock property chains, as activity at the lower end allows existing owners to move into larger and higher-value properties.

 

“However, of course, allowing people to borrow more does not make homes more affordable. Strong affordability checks will remain essential, particularly for borrowers with fluctuating incomes.

 

“Unless housing supply also increases, greater borrowing power could simply place further pressure on prices.”