Mortgage availability for many customers has been increased after two of the country’s biggest lenders relaxed some of their criteria for new applications.
Halifax and Nationwide have both made moves to streamline mortgage availability for housebuyers by making changes to their stress tests and also easing restrictions on incomes.
It follows the historic move from the Bank of England (BoE) to cut the base rate to an all-time low of 0.25 per cent this summer in a bid to stimulate the economy, and is now seeing savings passed on to consumers in the mortgage market.
Nationwide was an early mover by cutting its stress rate for all residential affordability calculations to 6.74 per cent, including equity share, for applications that began or were reprocessed after August 24.
According to Nationwide, the majority of customers immediately witnessed an increase in the amount the building society is willing to lend to them.
In a further bid to help encourage more mortgage applications, Nationwide has also changed its rules on requiring brokers to provide their clients' financial details.
The lender now requires just three months of bank statements with mortgage applications to show any maintenance payments, instead of the six months that was previously required.
Although clients will still be required to provide a court order, Child Support Agency assessment letter or written private agreement where required, it is hoped that the move will help to increase access for all customers.
A further move from the building society to alter its lending policy also means it will no longer accept all or part of a customer’s deposit gifted from a non-UK company.
The lender decreased it its mortgage affordability stress rate by 0.25 per cent to 6.75 per cent for all new mortgage applications after September 27, bringing it largely in line with Nationwide.
According to Ian Wilson, head of Halifax Intermediaries, the reduction in the stress rate is part of a wider commitment to providing “a range of accessible, value for money products designed to meet the changing needs of borrowers” in addition to supporting brokers with expansion in an evolving marketplace.
This was supplemented by Halifax Intermediaries revealing it will no longer accept a selection of allowances and income types to support mortgage applications, as it bids to simplify its income verification process.
Adoption Allowance, Guardian’s Allowance, Foster Care Allowance, Bursary Income and Stipend Income will no longer be accepted in any part, after the lender previously accepted up to 60 per cent of these as sources of income.
The lender is also helping to make things easier for brokers when it comes to providing client income; in cases where basic income is enough to support the mortgage application, other income streams will no longer need to be supplied.
Market analysts have welcomed the moves from Nationwide and Halifax, as well as several other lenders such as Barclays, who have each moved to lower their stress rates in the wake of the BoE decision.
A broad 0.25 per cent reduction in stress rates, accompanied by further cuts in mortgage rates on tracker deals and some standard variable rates, means that many borrowers are in an excellent position to get a foot on the housing ladder or move up it.
With the BoE’s Monetary Policy Committee expected to announce further reductions in its November announcement, even more attractive deals may enter the market before 2016 is over.
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