Lloyds Banking Group, which owns major high street lenders including Halifax, Bank of Scotland, BM Solutions, and Lloyds Bank itself, has introduced notable changes to its mortgage affordability assessments. These updates are designed to make it easier for a broader range of borrowers—particularly first-time buyers and existing homeowners—to access larger home loans in today’s competitive housing market.
The bank group has eased its affordability calculations, particularly for borrowers applying for mortgage products with five-year fixed terms or longer. By adjusting the way it calculates the potential impact of future interest rate rises—commonly referred to as “stress testing”—Lloyds aims to give borrowers greater flexibility when securing a mortgage.
This change will be welcomed by many prospective homeowners and remortgagers. Under the revised rules, a typical household could see a significant increase in their borrowing power. The group has stated that, on average, customers might now be able to borrow approximately 13% more than they previously could. In practical terms, this equates to around £38,000 of additional borrowing for a standard family.
To illustrate this, Lloyds provided an example of a household with two adults and two dependent children, a combined annual income of £75,000, and standard financial commitments. Previously, such a household might have been able to borrow up to £286,000. With the new affordability model in place, that figure could rise to around £324,000, making it easier for families to afford homes that may have been just out of reach.
These changes will apply across a range of applications, including first-time buyers, home movers, and remortgage customers. The focus is on mortgage products with a term of five years or longer, where the risk of rate rises is typically seen as lower due to fixed repayments.
The announcement from Lloyds follows similar action by Santander last month, which also reduced its mortgage stress test rates. Santander reported that its move allowed some borrowers to access between £10,000 and £35,000 more than they could under the previous criteria. The trend among lenders suggests a broader shift in the industry towards supporting borrowers who may have been constrained by tighter affordability rules.
Amanda Bryden, Head of Halifax Intermediaries, commented on the changes, saying: “It is always a careful balance when calculating whether a loan is affordable both now and in the future.” Her statement reflects the continuing challenge for lenders to ensure responsible lending while also responding to growing pressures on buyers in a difficult housing market.
The Financial Conduct Authority (FCA) has also weighed in on the issue recently, noting that some lenders may be overly cautious in how they apply stress testing. According to the FCA, this could be unfairly limiting access to mortgages for applicants who could reasonably afford repayments under current and foreseeable future conditions.
In addition to easing affordability rules, the market is seeing a growing number of mortgage products available with low deposit requirements. Financial data provider Moneyfacts reported a surge in deals allowing buyers to put down just 5% or 10% deposits, reaching the highest levels seen since March 2008. This is particularly encouraging news for first-time buyers, who often face the steepest challenges in saving for a deposit.
Taken together, these changes mark a positive step for the UK mortgage market. By making mortgages more accessible and increasing borrowing potential, lenders like Lloyds Banking Group are offering a lifeline to many households hoping to purchase or move home in 2025. As more banks consider similar adjustments, the coming months could see increased activity in the housing market, supported by more flexible lending options and a greater choice of products.
The recent adjustments to stress testing by lenders could mark a turning point for many families looking to get on the property ladder or move to a new home. With these changes, a typical household may now be able to borrow over £38,000 more than before, offering fresh hope for those struggling to meet previous lending criteria.
Aaron Strutt, Product and Communications Director at Trinity Financial, described the move by Halifax as a “significant change”. He emphasised that strict affordability stress tests have long been a barrier for many would-be homeowners. Despite being able to manage the repayments in practice, they were often declined based on outdated or overly cautious affordability checks.
Strutt also pointed out that Santander recently made similar changes to its lending criteria, suggesting that more lenders may follow suit. He acknowledged the existence of various schemes aimed at helping first-time buyers and higher earners secure larger loans, but noted that many families still face difficulties in borrowing the amounts they need.
A key challenge has been that although lenders often wish to offer larger mortgages, tight affordability regulations have made it harder for them to do so. Strutt suggested that recent changes introduced by the government may have helped to shift this dynamic, allowing banks and building societies more freedom to adjust their lending strategies.
Typically, lenders base their calculations on income multiples, which vary depending on an applicant’s financial situation. As a general rule, borrowers can expect to be offered loans of between four and six times their combined or individual salaries, although this is influenced by other expenses and commitments.
These developments come on the heels of comments from the Financial Conduct Authority, which recently stated that lenders have been too conservative when issuing home loans to first-time buyers. FCA Chief Executive Nikhil Rathi told the Treasury Committee that current regulations do, in fact, offer lenders some flexibility in how they apply stress tests—but that many have chosen not to use it.
The combination of regulatory encouragement and shifting market dynamics now seems to be pushing lenders to ease up on some of their more rigid lending practices. This could provide a much-needed boost to prospective buyers who have struggled with affordability restrictions, particularly those looking to buy their first home.
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