The National Loan Market Committee, a body designed to make home buying more affordable, has announced plans to change the buying conditions for lenders. The biggest change involves raising the minimum downpayment which lenders will be required to hold on new loans in order to ensure it is affordable. This new rule will mean that investors – anyone buying a property in the UK with more than a 50% deposit – will have to be willing to stump up at least 25% of the purchase price, including fees. When asked for more details, a spokesperson for the City regulator, the Financial Conduct Authority, said: “We consider that allowing lenders greater scope to adopt more rigorous guidelines will boost competition in the mortgage market and help more borrowers get on the housing ladder by making it easier to get a mortgage.”
Buyers in London to lose a chunk of their deposit
The City regulator is forcing lenders to levy higher fees for mortgages in London.
From April next year, lenders in the capital will need to take into account the cost of stamp duty on buyer’s deposits when offering mortgages to buyers with a larger deposit.
These restrictions are being introduced to “level the playing field between buyers in London and buyers in other parts of the country”, says Alex Hollis, chief executive of the London & Eastern Europe Mortgages Agency.
In 2017, the average stamp duty bill for a typical home in London was almost £40,000.
Of course, in real terms, buyers already face more homebuyer costs in the capital than anywhere else in the UK, with fees, legal costs and also stamp duty rates – which are higher than in other parts of the country – all pushing up the costs.
It is the second change introduced by the City regulator on mortgage lending rules in six months. Back in May, it released a set of principles that it was urging lenders to follow – a set which had become known as the “sell side principles”.
These rules intended to persuade lenders to make it easier for homebuyers to get a mortgage for smaller deposits, and the City regulator is now introducing measures to make it easier for them to comply with the rules.