Londoners could be handed their own special mortgage rules which allow people to borrow more money than those living in other UK cities if a key Budget recommendation is adopted. The government has invited key organisations across the country to make submissions on what they think the Prime Minister and his new Chancellor John Healey should include in their first Budget on October 28.
Chamber proposes 'London Mortgage' at 6x income
As well as the abolition of Sunday Trading Laws, the London Chamber of Commerce has suggested that Londoners should be given special borrowing rules to allow them to take on larger mortgages. Usually, banks will only lend roughly 4.5 to five times a borrower’s salary.
But London’s higher prices make it more difficult to get on the ladder, even accounting for the higher wages some firms pay to London workers. Instead, Londoners should be able to take on more debt and borrow six times their salary, the Chamber has argued, to avoid high earning professionals being ‘locked out’ of the property market.
Chamber's case for higher borrowing cap
The Chamber said as part of its submissions to the government: “Enable banks and building societies to offer a 'London Mortgage' at 6x income: London's house prices sit so far above the national picture that the standard cap on borrowing at around 4.5 to 5 times income locks out even high-earning professionals with secure jobs and strong credit, people who comfortably afford rent far in excess of a mortgage payment yet are told they cannot borrow to buy.
“Giving lenders the regulatory flexibility to offer creditworthy London borrowers up to 6x income would align lending rules with the reality of London prices and let people who demonstrably can afford to own actually do so.
“Those who can afford to rent privately in London over the long term can usually afford to buy. This is not a demand subsidy poured into a frozen market: paired with the supply measures above, it is what allows new homes to convert into ownership for the people they are built for, rather than sitting unsold above the reach of the very buyers who need them.
“For those looking to sell and move to a bigger home, pulling this lever would also help to unblock the housing market, which is struggling because there are so few Londoners in a position to buy.”
Budget pressures ahead
Mr Healey and Prime Minister Andy Burnham are facing a difficult prospect ahead of the October 28 Budget. They have promised to help households and businesses with the increased costs, driven up by the US’s war with Iran, all while the same inflation continues to erode the Government’s spending power and borrowing costs.
Speaking to the BBC from the IMF meeting, Mr Healey was asked if the coming fiscal statement to the Commons would be a tough, or even an austere Budget. He replied: “Well, it’s a tough time. People can people can see the global economic conflicts, they know the pressure it’s putting on them, they understand it’s putting pressure on the Government.”
