Ministers hold talks with mortgage lenders over plans to allow bigger loans

Ministers have met mortgage lenders to discuss plans to allow the issuance of larger mortgage loans, a move that could affect homeowners, prospective buyers and buy-to-let landlords as many face looming fixed-rate expiries and higher borrowing costs.

Officials and lenders held talks about how to expand lending capacity amid a market shaped by higher interest rates and tighter affordability tests. Consumer advisers and brokers urged those needing new mortgages or remortgaging to assess their options as soon as possible to avoid being caught by rising costs or reduced product availability.

Advisers told borrowers whose fixed-rate deals are due to end that they can often lock into a new deal six to nine months in advance, frequently without obligation to proceed. Many mortgage products allow arrangement fees to be added to the loan and only charged when drawn, which can enable borrowers to secure a rate without immediate upfront cost. However, adding fees to the mortgage increases the loan balance and means interest will accrue on the fee over the whole term, a choice that may not suit all borrowers.

Those with agreed home purchases were also advised to secure rates early to stabilise monthly payments. Mortgage experts cautioned buyers against overstretching, noting that higher mortgage rates can reduce overall borrowing capacity and could put downward pressure on house prices.

Buy-to-let landlords face distinct risks, particularly those on interest-only mortgages, who may see a larger jump in monthly costs when they remortgage. Industry guidance encourages landlords to begin remortgaging well in advance, as product availability and affordability criteria for buy-to-let lending can differ from residential mortgages.

Consumer groups and brokers recommended speaking to a mortgage broker to compare deals and understand the implications of different products. Broker services can search deals across multiple lenders and assess suitability given individual circumstances, advisers said.

One broker highlighted in industry reporting is London & Country Mortgages (L&C), which offers mortgage-finding tools and is authorised and regulated by the Financial Conduct Authority. The FCA does not regulate most buy-to-let mortgages. Industry material accompanying broker services warns that borrowers risk repossession if they do not keep up mortgage repayments.

The discussions between ministers and lenders come as the mortgage market adjusts to higher interest rates than seen in recent years and as households confront a wave of fixed-rate expiries. How or whether government or regulatory policy will change to alter affordability rules or lender behaviour was not specified in reports of the meetings.

For borrowers and landlords, immediate action may ease transition risks: comparing rates, consulting a broker and, where appropriate, securing a rate in advance were widely recommended steps. Those considering adding fees to a loan were advised to weigh short-term cashflow benefits against the long-term cost of paying interest on fees added to the mortgage principal.

Any changes to the regulatory framework or formal policy measures that emerge from talks between ministers and lenders will be watched by market participants and consumers alike, given their potential to influence borrowing costs, lending standards and demand in the housing market.