The Bank of England have confirmed that as of the 1st of August they have removed the requirement on all UK mortgage lenders to carry out an affordability test on borrowers.
The test required mortgage lenders to ensure that potential borrowers could afford a 3% rise in mortgage rates and was introduced in 2014 in response to the financial crash, but it led to headlines claiming that people were denied a mortgage because they bought a coffee from Starbucks.
Whilst individual lenders will all have their own affordability tests and income multipliers, it could be of particular assistance to first time buyers who could afford to pay their rent but failed an affordability test to pay for a mortgage that was less than their rent.
Buyers shouldn’t get too excited; the removal of the test requirement will not mean that all lenders will drop it, or that any will drop it straight away whilst they reformulate their lending calculations. However, it will hopefully lead to a sensible relaxation of the lending rules in the not-too-distant future. Lenders will still be limited as to how many mortgages that they can offer above 4.5 times the borrowers salary.
Whilst this is good news for borrowers, the difficulty in saving a deposit in times of rising prices, is the biggest barrier to entering the housing market and we are still seeing a lot of first and second time buyers relying on the ‘bank of Mum and Dad’.
If you are looking to buy your first home, or your children are looking to buy theirs with your assistance, our property team are here to help.
Please call 01256 320555 or email us at email@example.com to book an appointment.
Associate & Head of Residential Property