Newly relaxed mortgage lending guidelines have the potential to increase the number of first-time homebuyers by 24 percent in the coming years, as per expert predictions.

This change, initiated by the Bank of England in March, eliminates the requirement for banks to stress test borrowers against the average standard variable rate, currently at 7.25 percent, plus an additional 1 percent.

Major mortgage lenders including Lloyds Bank, Nationwide, and NatWest have begun to adjust their affordability assessments, employing various methodologies.

While all buyers now have access to greater borrowing capacity, real estate consultancy Savills has focused on how these adjustments specifically impact first-time buyers.

If the stress testing threshold is reduced to 7 percent—a common practice among lenders—average first-time buyers with a combined income of £62,000 could secure an additional £25,900 in borrowing.

In the absence of significant increases in housing supply and with more individuals possessing additional funds, property prices are predicted to rise in response to heightened demand. It is estimated that, assuming half of the added borrowing (£12,950) influences property prices, there could be a 5 percent increase in prices by 2030.

This scenario might decrease the average first-time buyer deposit from £58,000 to £45,000, leading to an anticipated rise in first-time home purchases from 340,000 in the current year to 420,000 by 2030, according to Savills.

However, the benefits may be lessened if a larger portion of the additional borrowing contributes to higher property prices.

If approximately three-quarters of the increased borrowing power—around £19,425 for the average couple—reflects in the purchase price, property prices may escalate by 7.5 percent over the next five years. Consequently, while the average deposit for first-time buyers would decrease, it would only reach £51,500, with the number of first-time buyers projected to rise more gradually to 387,000 by 2030.

Lucian Cook, the head of residential research at Savills, stated that the relaxed lending conditions could support the government’s objectives for housing development by expanding the number of potential buyers for new properties. He cautioned, though, that to ensure these alterations foster increased housing supply rather than merely driving up prices, developers need to enhance their construction efforts.

“The concern with these changes is if the heightened demand isn’t matched with adequate supply, a significant portion of the additional borrowing could simply escalate housing prices, reducing the intended effectiveness of these regulatory adjustments,” he warned.