Bank eases mortgage rules to help first-time buyers

The Bank of England rolled out looser mortgage rules yesterday that policymakers hope will help 36,000 more first-time buyers on to the housing ladder each year.

- Kalyeena Makortoff Graeme Wearden

The new guidelines announced by the central bank mean individual banks and building societies can offer more high loan-to-income (LTI) mortgages, which are worth 4.5 times a borrower's annual earnings or more.

While high-LTI loans are usually considered more risky, the Bank said most lenders were not taking advantage of their individual caps, meaning there were fewer of them available to borrowers than had been hoped.

Sam Woods, the chief executive of the Prudential Regulation Authority, the Bank's regulatory arm, said the changes should benefit tens of thousands of first-time buyers. “It’s more than a tweak,” Woods said yesterday. “If you look at the unused capacity that is there at the moment, we think that’s equivalent to another 36,000 high-LTI, first-time buyer mortgages per year in the UK.”