UK’s Santander Expands Borrowing Limits — Could Canada See Similar Moves?

What Happened in the UK

In the UK, Santander has announced a major change to its mortgage lending criteria, increasing the maximum loan-to-income (LTI) ratio for certain borrowers. For applicants earning £100,000 or more, the bank will now allow borrowing up to 5.5 times annual income—a jump of up to 24% in borrowing power compared to previous limits.

The policy applies to both home purchases and remortgages (renewals), with a minimum 10% deposit or equivalent home equity. For some high-income couples, this means an extra £130,000 in potential borrowing capacity.

The move comes amid a competitive UK mortgage market, where lenders are easing affordability tests to attract creditworthy borrowers as rates begin to stabilize.

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Why This Matters for Canadians

Canada has historically been more conservative than the UK in lending limits, due in part to the federal mortgage stress test. Under current Office of the Superintendent of Financial Institutions (OSFI) rules, borrowers must qualify at the greater of:

• Their contract rate + 2%, or
• The benchmark qualifying rate (currently 5.25%)

This effectively caps borrowing at 4.5–4.7 times household income for many Canadians, even with excellent credit and strong down payments.

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Could Canada Loosen Borrowing Rules?

Industry analysts are divided:

• Possible: If housing affordability remains a political flashpoint and interest rates trend downward, some lenders may lobby for higher LTIs, especially for low-risk, high-income clients.
• Unlikely in the Short Term: OSFI has consistently taken a cautious stance, prioritizing systemic stability over looser lending rules.

However, even without regulatory changes, certain niche lenders and credit unions already offer more flexible lending criteria for high-income professionals—sometimes approving up to 5x income on a case-by-case basis.

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Lessons for Canadian Borrowers

1. Higher Income Doesn’t Always Mean Higher Approval

Even if your household income exceeds $200,000, Canadian lenders still apply strict debt service limits. This can limit approval amounts, especially in high-cost markets like Toronto and Vancouver.

2. Alternative Lenders Can Offer More Flexibility

Some credit unions and alternative lenders in Canada already approve higher LTIs for certain professionals (e.g., doctors, lawyers, tech executives) due to stable career trajectories and low default risk.

3. Debt Matters as Much as Income

Just like in the UK, lenders in Canada will reduce borrowing limits if you carry significant consumer debt—credit cards, car loans, or personal lines of credit.

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Example: The Vancouver Couple

Mark and Priya, a married couple in Vancouver earning $220,000 combined, hoped to buy a home in the $1.5M range. Under standard bank criteria, they were capped at around $1.1M in borrowing after the stress test.

If Canada adopted a Santander-style 5.5x income policy for high earners, they could qualify for roughly $1.21M—still not enough for their dream home, but significantly closer.

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Risks of Higher Borrowing Limits

While increased LTI caps can help more buyers enter the market, they also:

• Risk inflating home prices if demand spikes
• Increase household debt loads, making borrowers more vulnerable to future rate hikes
• Put pressure on regulators to tighten rules again if delinquency rates rise

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What to Watch in Canada

• Bond Yield Trends: If yields continue to ease, lenders may compete more aggressively for qualified buyers, possibly offering higher LTIs without formal rule changes.
• Bank of Canada Policy: Expected rate cuts in late 2025 could further shift the balance in favour of borrowers.
• Regional Differences: Certain provinces, especially B.C. and Ontario, could see niche lenders trial higher LTI products to win market share.

Santander’s move shows how quickly lending rules can shift in response to market conditions. While Canada may not see a formal jump to 5.5x income across the board anytime soon, well-qualified borrowers—especially high-income earners—may find more generous options emerging through alternative lenders and broker channels.

If you’re looking to maximize your borrowing power, the key is to shop around, work with a broker who knows which lenders are most flexible, and ensure your debt profile is as clean as possible before applying.

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