The Chancellor’s decision to relax mortgage lending rules as part of a broader financial reform package should be treated with caution, according to estate and lettings agency DJ Alexander Ltd. While the reforms are intended to support first-time buyers and unlock access to the housing market, property experts warn that without a corresponding boost in supply, the changes could trigger unsustainable house price inflation.

Leeds Reforms and Mortgage Access

The so-called “Leeds Reforms”, unveiled by Chancellor Rachel Reeves earlier this month, include key measures to revive activity in the UK housing market, such as:

• Easing loan-to-income (LTI) caps to allow buyers to borrow more relative to their earnings;

• Simplifying mortgage lending rules to support remortgaging;

• Making the Mortgage Guarantee Scheme permanent, to secure access to high loan-to-value (LTV) products during economic uncertainty.

The moves have been welcomed by lenders and prospective homebuyers at a time when transaction volumes remain sluggish and affordability remains a major barrier.

However, David Alexander, CEO of DJ Alexander Scotland, stressed that the reforms carry serious risks if not accompanied by policies to address the fundamental supply-demand imbalance. “There is little doubt that a relaxation of the mortgage market will be welcomed by buyers and lenders and will be seen as a boost at a time when house price growth is slowing,” said Alexander.

“However, this needs to be implemented with caution as there is the potential to create a rapid house price boom which will invariably be followed by a bust.”

Avoiding a Repeat of 2008

Alexander drew parallels with the lead-up to the 2008 financial crash, during which lax lending practices — including inflated income multiples and limited affordability checks — fuelled unsustainable house price rises, particularly in parts of Scotland. He warned that the same conditions could emerge if more generous borrowing is not matched by a rapid increase in housing delivery. “Without increased housing supply, the danger will be that while more people will be able to access greater funding, this will simply be used to pay inflated prices for a limited number of properties,” he said.

“The worst outcome for these policies is that it could actually make affordability worse rather than better.”

Mortgage Guarantee Scheme: A Double-Edged Sword?

The decision to make the Mortgage Guarantee Scheme a permanent fixture is seen by many as the most potentially impactful of the reforms. By underwriting high-LTV loans during economic downturns, the government aims to support both financial stability and continued lending in the PRS and owner-occupier markets.

But Alexander cautioned that its success will depend entirely on careful implementation and oversight: “Success will depend on how this is implemented and whether it is appropriately monitored. Poor execution could do more harm than good.”

The Legacy of the 2008 Crash

Data from the Registers of Scotland’s Property Market Report 2024–25 highlights just how long-lasting the damage from the last housing crash was. Total market value of residential sales in 2024–25 stood at £22.7 billion — still below the 2007–08 peak of £23.2 billion. “It took over nine years for the housing market to recover,” Alexander said.

“It can be very easy to turn the lending taps on, but much harder to turn them off.”

Key Takeaway
While the Chancellor’s reforms may offer much-needed support for first-time buyers and stimulate market activity, housing analysts warn that without parallel investment in housebuilding and PRS support, they risk inflating prices, not improving affordability.