The Bank of England’s (BoE) Financial Policy Committee has confirmed that it will consult on withdrawing its affordability test for new mortgages in the first half of 2022.
According to the BoE, its requirement for most mortgages to be no more than 4.5 times a borrower’s income, plus separate affordability rules from the Financial Conduct Authority (FCA), are sufficient.
It said a lower long-term outlook for interest rates did not automatically mean smaller risks for borrowers, as it partly reflected weaker prospects for incomes and meant there was less scope for borrowing costs to fall in a downturn.
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Paul Broadhead, head of mortgage and housing policy at the BSA, said: “We welcome the Financial Policy Committee’s intention to withdraw the affordability stress test for new mortgages.
“This measure mainly impacts certain borrowers, such as first-time buyers and those looking to buy in the South East, who can clearly afford a mortgage but are hindered by the requirement to test that they could still pay their mortgage if rates were in the region of 6%-plus.
“Lenders will continue to check that a mortgage is affordable both now and if interest rates increase in line with market expectations.”