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First-time buyers across the UK may soon find it easier to step onto the property ladder thanks to a significant rule change by the Bank of England (BoE). The move could open the door to thousands more higher-value mortgages each year, giving buyers a much-needed boost in an increasingly expensive market.
Until now, strict rules meant that fewer than 10 per cent of new mortgages issued could have a loan amount worth more than 4.5 times the borrower’s annual income. This limitation has often been a stumbling block for first-time buyers, especially in areas where house prices have grown faster than wages.
Under the BoE’s new guidance, this threshold will increase to 15 per cent of new mortgages across the industry. Some lenders, including building societies and high street banks, could even choose to go beyond this level in response to local demand and market competition.
Early estimates from the BoE suggest that this change alone could lead to around 36,000 additional mortgages being issued each year with higher loan-to-income ratios. For many prospective homeowners, this could make the difference between renting and finally buying their first property.
The timing of this rule change fits with a broader focus on boosting the housing market. The government continues to push for stronger economic growth, while the Labour Party has pledged to build 1.5 million new homes during this parliament. These promises put housing firmly in the spotlight this year.
Earlier in 2025, some lenders also began to relax stress test rules, which traditionally limited how much people could borrow by testing affordability against potential future rate rises. Meanwhile, the return of 100 per cent mortgages has helped buyers who don’t have large deposits saved up.
Labour has also outlined plans to invest a substantial £39 billion over the next decade into affordable and social housing. This investment aims to ensure more people can buy or rent a home that suits their needs, even if house prices keep rising.
In addition, Labour has set aside a further £1.2 billion to support training and apprenticeships across the construction and housing sector. This step is designed to bring new talent into the industry, helping to build the homes the country needs.
Despite these efforts, property prices remain high in many parts of the UK, although growth has slowed slightly in some regions. Sellers are increasingly having to reduce asking prices to finalise deals, reflecting a softer but still competitive market.
Helping more people onto the housing ladder is widely viewed as a crucial step not just for individual families, but also for the wider economy. Increased homeownership supports local spending, boosts confidence, and contributes to long-term wealth building.
Nationwide’s chief executive, Dame Debbie Crosbie, summed this up well: “It will help people who struggle to get on the property ladder because high rents and living costs have made saving for a deposit and meeting mortgage affordability tests extremely challenging.”
Reflecting this competitive environment, Nationwide has just launched new mortgage deals targeted at first-time buyers. These include a two-year fixed rate at 4.13 per cent and a five-year fixed rate at 4.19 per cent, with switcher rates for existing customers starting from just 3.84 per cent.
The BoE’s current base interest rate remains at 4.25 per cent, but many analysts believe there could be a cut as early as next month. Mortgage products themselves are often priced based on swap rates, which reflect future expectations of interest rate movements, sometimes making them cheaper than the official base rate.
Separately, the Lifetime ISA, which helps first-time buyers save with a government bonus, could face reform. Analysis by AJ Bell warns that if thresholds remain frozen while property prices rise, buyers in as many as 62 regions across the UK could be priced out of using it penalty-free by 2029.
Lastly, data from Rightmove shows changing preferences among first-time buyers. Over the past decade, interest in buying within UK cities outside London has grown by 16 per cent on average. In contrast, demand to buy homes near the coast has stayed largely flat, and interest in London itself has actually fallen by around 7 per cent among first-time buyers.
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