Lenders will now stretch to 5.5x income, but the deposit is still the wall

As at 31 August 2026.

For most of the last decade, the first-time buyer conversation ended the same way: the bank will lend you about four and a half times your income, and that's the ceiling. That ceiling has moved.

What changed in the rules

The constraint was never really a hard legal cap on individuals. It was a limit on lenders. Each lender could only write 15% of its new mortgages at a loan-to-income ratio of 4.5 or above. Most managed that quota by simply refusing to go over 4.5x for anyone who wasn't an exceptional case.

In July 2025 the Bank of England's Financial Policy Committee recommended removing the firm-level version of that cap. The market-wide 15% limit stays; the individual lender straitjacket goes. The FCA and PRA published formal proposals on 1 April 2026, and the FCA opened a wider review of mortgage rules (CP26/18) on 9 June 2026. Final rules are expected before the end of this year.

Lenders did not wait for the paperwork. Several now lend at 5.5 times income as standard, and a handful will go to 6 or even 6.5 times for specific borrower profiles, typically higher earners, certain professions, or applicants with a strong deposit. Nationwide has separately reduced the stress rates it uses to test affordability, which quietly raises the maximum loan for everyone it applies to.

What that looks like in real money

Two people earning £35,000 each, £70,000 combined:

That's £70,000 of additional buying power between the old default and the current stretch. In most of the country, £70,000 is the difference between a flat and a house.

A caveat worth stating plainly: income multiples are the headline, not the calculation. Every lender runs an affordability model that takes your committed outgoings, childcare, car finance, student loan plan and credit commitments into account. Two households on identical salaries routinely get offers £60,000 apart. The multiple tells you which lenders are worth approaching. It doesn't tell you what you'll be offered.

The problem it doesn't solve

Higher multiples let you borrow more. They do nothing about the deposit.

The average UK house price is around £271,000, with first-time buyers paying roughly £183,000 on average. In London, a typical first-time buyer now needs a deposit worth more than 2.5 times their annual household income, up from about 1.9 times previously. The borrowing constraint loosened; the savings constraint got tighter.

Which is where the 5% deposit route matters.

Freedom to Buy, the 5% deposit scheme

The government's permanent mortgage guarantee scheme, branded Freedom to Buy, went live in July 2025, replacing the temporary scheme that ran from April 2021 to June 2025.

How it works: the government insures participating lenders against part of their loss if a high loan-to-value mortgage goes wrong. That makes lenders more willing to offer 91 to 95% mortgages, which is the band that disappears first whenever the market gets nervous.

The essentials:

• Deposit: from 5%
• Loan-to-value: 91% to 95%
• Property price cap: £600,000
• Who's eligible: first-time buyers and home movers, across the UK
• Permanent: not a time-limited window, so there's no deadline pressure

The predecessor scheme completed over 53,000 mortgages, 86% of them for first-time buyers, so this is a well-trodden route, not an experiment.

The trade-off is honest: a 95% mortgage costs more per month than a 90% one, because you're borrowing more at a higher rate band. Whether that's better than renting for another two years while you save the extra 5% depends on your rent, your saving rate, and what house prices do in the meantime. It is a genuine calculation, not an obvious answer, and it's worth doing properly.

Three things I'd tell any first-time buyer right now

One: find out your actual number before you view anything. Not a comparison-site estimate, a real affordability assessment across lenders who'll take your profile. Viewing houses at the wrong price point wastes months.

Two: your credit file matters more than your score. Lenders don't see the number the apps show you. They see your file. Six months of clean, boring conduct, no missed payments, no new credit, low utilisation, is worth more than any amount of score optimisation.

Three: the cheapest headline rate is often not the cheapest mortgage. Arrangement fees, valuation fees, cashback and early repayment charges move the true cost by thousands. Compare the total cost over the fixed period, not the rate.

If you're self-employed

Being self-employed doesn't disqualify you, it just means the evidence is different. Most lenders want two years of accounts or SA302s, a few will work with one year, and how they treat retained profit inside a limited company varies enormously between lenders. If you've been told no by your bank, that's one lender's criteria, not a verdict.