House prices could rise by nearly £8,000 across the UK under plans to ease mortgage rules brought in after the 2008 financial crash.
Chancellor Rachel Reeves has backed plans put forward by the Financial Conduct Authority (FCA) to loosen restrictions on mortgage lending which could increase the loan-to-value ration for first-time buyers.
Analysis by the estate agency Savills estimates this could bring 125,000 new buyers to the market, driving up prices by around 3%, or £7,679, due to increased competition.
The City regulator has proposed simplifying its responsible lending rules as part of a contentious push by the Treasury for regulators to promote growth.
It is not yet clear exactly how the FCA will ease the rules, but any measures that will open up the mortgage market to more buyers will increase demand and drive up prices unless there is a corresponding jump in supply.
Mortgage industry experts expect the FCA to review its “stress test”, which was introduced in April 2014 after the 2008 financial crisis. Stress tests check whether borrowers could afford their loans if interest rates rose. Rules on interest-only mortgage lending could also be looked at.
Savills’ analysis was based on what could happen if the changes increased the average loan-to-income ratio among first-time buyers from 3.22 to 3.47.