The Bank of England have scrapped a key mortgage affordability test meaning it may be easier for people to get on to the property ladder.
The requirement meant that borrowers had to be able to afford a three-percentage-point rise in interest rates before they could be approved for a mortgage.
From 1st August 2022, the ‘stress test’ is no longer required, and was introduced back in 2014 following the recession back in 2008.
The test was part of a package of measures designed to prevent people borrowing more than they could afford, which is thought to have contributed to the financial crash.
There is, however, another rule staying in place to measure buyers’ affordability. This rule limits most new mortgage lending to a maximum of 4.5 times a borrower’s income, which alongside a separate affordability criteria by the Financial Conduct Authority, should provide enough resilience to the UK financial system.
The Bank of England has said that around 6% of mortgage borrowers would have been able to have secured a bigger loan if this stress test had not been in place.
Original source: https://www.theguardian.com/money/2022/aug/01/bank-of-england-scraps-mortgage-affordability-test
