Mortgage reforms fall short as housing affordability challenges remain

Kelly Boorman, National Head of Construction at RSM UK, reacts ahead of the Chancellor’s Mansion House speech and anticipated easing of mortgage rules: “With recent announcements outlining the government’s intentions to accelerate housebuilding with more funding, investment in training and improved visibility on future projects, it’s clear that housing is recognised as key to unlocking economic growth. While these policies signal a step in the right direction, affordability is still a challenge for first time buyers looking to get on the ladder and creating a barrier to home ownership. The proposed introduction of a permanent mortgage guarantee scheme should support lenders in bringing more products to market and go some way towards tackling this issue, especially during periods of economic uncertainty.

“We saw the share of high loan-to-value mortgages rise to the highest level since 2008 in Q1 2025, so plans to increase high loan-to-income mortgages come as no surprise. Increasing access to Nationwide’s Helping Hand Mortgage will also be beneficial for single and joint applicants with lower salary thresholds. Although there are advantages to a loosening of lending rules, there are risks, especially around the valuation of properties and creation of negative equity if not carefully managed, which could see lenders remaining risk averse and impacting valuations, to mitigate risk of repossession and a return to conditions last seen during the financial crisis in 2008.”

She added: “Despite plans to lower salary thresholds and recognise rent payment as a measure of financial reliability, affordability remains a major barrier for first-time buyers. As a result, housebuilders are exploring alternative models like shared ownership, while also committing to deliver more social and affordable housing, despite smaller margins. However, it’s still uncertain how lenders will adapt to these reforms, particularly in terms of accepting developers’ valuations on new builds, which will be key to unlocking home ownership for more people.”