A recent article in The Telegraph revealed that the Bank of England is poised to loosen mortgage lending rules which were introduced in the wake of the financial crisis. It is understood that officials are considering softening affordability checks for borrowers as part of a review of the market restrictions. Is this a good idea for the housing market or could it lead to a housing bubble and history repeating itself?

The tighter lending rules were put in place in 2014 as a way of avoiding a repeat of the crisis and protecting buyers, however, despite an era of low borrowing costs, it has made it very difficult for first-time buyers to get into the market. So, should the lending criteria be eased to allow more people to get their foot on the first rung of the ladder?

According to National Advisory Council Member for The Guild of Property Professionals, Simon Hughes, who is the Managing Director of Conran Estates and a qualified Independent Mortgage Adviser, easing lending criteria would not be good for the market at all. “Relaxing lending rules would be a bad idea as it could lose control of the market as it did in 2008. Rather than changing the mortgage lending rules, lenders and government need to be innovative with products and build more homes by allocating land and ensuring the planning process is simplified,” adds Hughes.

When asked whether he thinks the current lending criteria is holding buyers back or whether there are other factors at play, Hughes says It is holding back those with lesser deposits. “Innovation is the way forward, with low deposits (5%) at the forefront of government decision making! Equity Release could be a solution, when priced at a favourable level, as this is a great way for grandparents to leave their legacy whilst alive. It could also reduce their inheritance tax as well. Obviously, this is a high-risk product, and independent advice is key,” he comments.

Houses prices are currently soaring, so wouldn’t loosening lending criteria add more fuel to the fire and push house prices up further? “It is very possible that relaxed lending rules would continue to push property prices skyward, which ironically would push more people out of the market. Again, the solution is to build more homes and ensure innovative schemes and lending is out there in a favourable way for first-time buyers in particular,” answers Hughes. “Other possible solutions include Help-To-Buy style products which don’t just cater to new builds, but other types of properties as well. Review the government part of the product and ensure that interest on this portion is delayed more than the five years, in fact I would suggest ten years. There are other ways which buyers can be supported and helped to get their foot in the door without potentially creating a crisis for the housing market in the future.”