"While national policies set the stage, regional regulations and housing policies can create vastly different conditions across the UK"
- Pete Mugleston - Online Mortgage Advisor
When buying a home, it’s about more than just finding the perfect property. Regional policies and regulations significantly influence mortgage options and affordability, and these localised rules and initiatives can create varying conditions across the country, affecting how accessible and affordable mortgages are in different areas.
The national scene
On a national level, the Bank of England sets the base interest rate which directly impacts mortgage rates across the UK. When the base rate increases so do mortgage rates, making borrowing more expensive. Conversely, lower base rates make mortgages cheaper, stimulating borrowing and often pushing up house prices.
While national policies set the stage, regional regulations and housing policies can create vastly different conditions across the UK.
London
In London, the sky-high property prices have created some unique challenges, but there are initiatives in place to help. One of these is the Mortgage Guarantee Scheme, a UK government-run scheme that offers UK citizens the option to apply for a mortgage with just a 5% deposit, helping first-time buyers get onto the property ladder and existing homeowners looking to move properties.
Additionally, strict planning regulations and a push for affordable housing developments are in place to try and balance the market. Despite these efforts, the high demand and limited supply mean that affordability remains a significant issue.
Southern England
Areas such as the South East of England often face higher property prices compared to the rest of the UK, which has several implications for mortgages. Due to high property prices, potential homeowners often need larger mortgages, leading to stricter lending criteria as lenders assess the increased risk.
The competitive market in the South can sometimes result in slightly better mortgage rates as lenders compete for business, but the need for larger deposits can be a barrier for some buyers.
Northern England
Regions like the North East and North West have seen different impacts. The Northern Powerhouse initiative aimed at boosting economic growth in the north has seen increased investment and development. Local councils in these areas often have more relaxed planning regulations compared to the south, encouraging new builds.
This can make housing more affordable, but it also depends on the availability of suitable mortgage products. Regional banks and building societies often step in here, offering tailored mortgage products to suit local market conditions.
Scotland
In Scotland, the government has introduced distinct housing policies. The Scottish Government’s First Home Fund provides first-time buyers with up to £25,000 towards the purchase of a property. The scheme has similar aims to its English counterpart but with different eligibility criteria and funding limits. These policies are tailored to address the specific needs of the Scottish housing market aiming to increase affordability and availability.
Wales
In Wales, the housing market profile differs significantly from the South of England, characterised by lower average property prices and distinct regional policies. Generally, lower property prices mean that buyers need smaller mortgages, making homeownership more accessible.
Wales has specific initiatives like the Help to Buy scheme - Wales, which assists buyers with smaller deposits and improves mortgage affordability. In rural areas, housing policies may focus on sustainable development and affordability, influencing mortgage products that cater to these specific needs.
Northern Ireland
Northern Ireland presents a unique housing market with its own set of policies affecting mortgage availability and rates. Property prices in Northern Ireland are generally more affordable compared to the South of England which means mortgages tend to be smaller and more manageable.
With a significant focus on social housing, there are various supports for lower-income households, indirectly affecting the broader mortgage market by stabilising rental prices and demand for private ownership.
The ripple effect on mortgage availability and rates
Regional policies can directly affect the types of mortgage products available. For instance, areas with higher property values might see more lenders offering larger loan-to-value ratios, catering to borrowers needing bigger loans. Conversely, in regions with lower property values, lenders might focus on offering competitive rates on smaller loans.
