Boost for First-Time Buyers as Major Lenders Ease Affordability Rules

HSBC, Halifax and Santander adjust mortgage stress tests, making it easier for first-time buyers to borrow more. What does this mean for the property market?

Good news has been hard to come by for first-time buyers over the past few years. Rising house prices, higher interest rates, and tough lending criteria have made it harder than ever to step onto the housing ladder.

Now, a shift is taking place that could turn the tide. Major lenders, including HSBC, Halifax and Santander, have announced changes to their affordability assessments, giving first-time buyers the ability to borrow more than before.

The moves come amid falling inflation, a softer interest rate outlook, and government pressure to support homeownership. But how much of a difference will these changes really make? And what should buyers, investors and developers be aware of as the lending landscape evolves?

In this article, we break down the changes, explore who benefits most, and discuss the wider implications for the property industry.

What Changes Are Lenders Making?

At the heart of the shift is a relaxation of mortgage stress testing.

Previously, lenders applied a ‘stress rate’ to applications, testing whether borrowers could still afford their repayments if interest rates rose significantly above current levels. This conservative approach, introduced after the 2008 financial crisis, was designed to protect both borrowers and the financial system from future shocks.

Now, several lenders are softening that stress test. For example:

• HSBC has reduced its stress rate, meaning borrowers can access an average of £39,000 more in mortgage funding compared to earlier this year
• Halifax and Santander have made similar moves, cutting the rate at which they assess future repayment affordability

These changes make a meaningful difference, especially for first-time buyers who are typically more constrained by income multiples and deposit sizes.

Why Are Lenders Changing Approach Now?

Several factors have driven this shift in strategy.

1. Improving Inflation and Rate Outlook

The Bank of England has signalled that interest rates may have peaked. Inflation is falling, and markets are beginning to anticipate rate cuts later this year.

With the risk of runaway rates receding, lenders feel more comfortable easing some of the ultra-cautious criteria that were introduced during the most volatile periods.

2. Competitive Pressure

The mortgage market has become fiercely competitive. Fewer transactions and lower lending volumes have pushed banks to find ways to win new business. Offering more generous affordability calculations is one way to attract first-time buyers, a vital segment of the market.

3. Political Influence

Supporting homeownership remains a major political priority, especially ahead of upcoming elections. There is subtle but real pressure on banks to ensure that lending practices do not unnecessarily exclude younger and lower-income buyers.

By adjusting affordability rules responsibly, lenders are responding to both market realities and political signals.

Who Benefits Most?

The changes primarily support first-time buyers, but the impact is nuanced.

• Single applicants with good credit but limited income now have a better chance of borrowing enough to purchase modest properties in competitive areas
• Joint applicants, such as couples or friends buying together, can leverage combined incomes more effectively
• Buyers in high-cost areas, such as London and the South East, gain some much-needed headroom in their budgets

However, it is important to note that lenders are still applying other stress factors, such as limits on maximum loan-to-income ratios. Not every applicant will automatically qualify for a significantly larger loan.

Responsible lending remains the baseline, even as criteria are eased.

Implications for the Property Market

The broader effects of these changes are likely to ripple across different parts of the housing market.

1. Increased Activity at Entry Level

More first-time buyers being able to access higher loan amounts will create additional demand for smaller and more affordable properties.

Expect to see heightened competition for:

• Flats and maisonettes
• Two- and three-bedroom houses in commuter belts
• New-build homes priced below £400,000

For developers and vendors operating in these segments, pricing strategies and marketing plans should reflect the renewed buyer energy.

2. Stabilisation of Lower and Mid-Tier Pricing

Additional first-time buyer demand may help stabilise prices at the lower and mid-end of the market, even if broader conditions remain challenging.

This is significant because much of the recent house price correction has been concentrated in properties under £500,000. Supporting demand here could limit further falls and create a floor for valuations.

3. New Opportunities for Brokers and Advisors

Mortgage brokers and financial advisors will play a crucial role in helping buyers understand the new affordability environment.

With criteria varying between lenders, applicants who shop around — or work with knowledgeable brokers — stand to benefit most.

Advisors who can explain the nuances clearly will be well placed to attract and retain clients.

Risks to Watch

While the changes are broadly positive for buyers, there are risks to monitor.

• Affordability risks: Borrowing more means higher monthly repayments, which could stretch budgets if personal circumstances change
• Rate shock: Even if initial rates are attractive, buyers must remain aware that rates could rise again, particularly over five- or ten-year mortgage terms
• Overheating at entry level: A surge in demand for affordable properties could, in extreme cases, lead to localised price spikes, making affordability worse in the long run

Lenders, regulators, and buyers themselves will need to remain vigilant to ensure that short-term gains do not create longer-term vulnerabilities.

Strategic Insights for Property Professionals

If you are involved in the property market — as a developer, agent, investor, or consultant — there are several actionable takeaways.

1. Target First-Time Buyer Segments

Marketing efforts should highlight affordability, availability of low-deposit mortgage options, and support schemes such as First Homes or Shared Ownership.

Clear communication about the potential for higher borrowing amounts could drive more enquiries and viewings.

2. Position Smaller Properties for Speed

Two-bedroom flats and starter homes that are priced competitively will likely see increased interest. Vendors should prepare for faster marketing cycles and be ready to act on early offers.

Developers should consider front-loading smaller units in phased releases to capture first-time buyer demand.

3. Educate Clients on Mortgage Options

For agents and advisors, offering basic education around mortgage affordability, stress testing, and lender criteria can differentiate your service.

Partnering with trusted mortgage brokers to run joint campaigns or webinars could provide added value to prospective buyers and boost conversion rates.

Will Other Lenders Follow?

It seems likely.

HSBC, Halifax, and Santander are significant players. Their moves will create pressure on other high street lenders to adjust affordability rules if they want to remain competitive.

While some regional building societies and niche lenders may continue to operate more conservatively, the overall trend appears to be toward greater flexibility in assessing borrower capacity.

For buyers, this widening choice is good news. For property professionals, it creates an evolving landscape that rewards those who stay informed and proactive.

Final Thought

After years of affordability tightening, the easing of mortgage stress tests is a welcome shift for first-time buyers. It restores some balance to a market that had begun to feel out of reach for too many young and aspiring homeowners.

For the property industry, this trend opens new opportunities — but also demands careful navigation.

Helping buyers understand what has changed, supporting them in making responsible decisions, and positioning stock to meet renewed demand will be key to success in this next phase of the market cycle.

Opportunity is returning. The key is knowing where to look and how to act.