Mortgage Affordability After the Withdrawal of the Affordability Test
The Bank of England has withdrawn its affordability test recommendation, which came into effect on August 1, 2022. The test required lenders to stress test borrowers’ ability to repay their mortgages at a rate 3% above their lender’s standard variable rate.
The withdrawal of the affordability test does not mean that mortgage affordability has gone away. Lenders will still need to assess borrowers’ ability to repay their mortgages, but they will now have more flexibility in how they do this. This could lead to more competition among lenders and lower mortgage rates.
However, it is important to remember that the withdrawal of the affordability test does not mean that everyone will be able to get a mortgage. Lenders will still need to be satisfied that borrowers can afford the repayments, even if interest rates rise.
If you are thinking about buying a home, it is important to speak to a mortgage adviser to get an understanding of your affordability and the options available to you.
Here are some things to keep in mind when considering mortgage affordability after the withdrawal of the affordability test:
- Your income: Lenders will still need to be satisfied that you have enough income to afford the mortgage repayments.
- Your outgoings: Lenders will also need to consider your other outgoings, such as your rent, bills, and other debts.
- Your deposit: The amount of deposit you have will also affect your affordability. A larger deposit will make you a more attractive borrower to lenders.
- The interest rate: Interest rates are expected to rise in the coming months, so it is important to factor this into your affordability calculations.
If you are concerned about your mortgage affordability, you should speak to a mortgage adviser. They can help you to understand your options and find a mortgage that is right for you.
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