Bank of England affordability test

The affordability test removal is not likely to make any impact, as lenders already have stringent calculations that they use. The biggest concern is the ever-increasing cost of living that will reduce how much first-time buyers can borrow, as most lenders use ONS figures to work out disposable income. Low earners are being hit the most. How are these potential buyers meant to save for a deposit with less disposable income in their households due to the cost of living crisis? We need intervention and to look at new schemes such as zero-deposit or generational mortgages.

The scrapping of the affordability test will not, I'm afraid, have a huge impact on the ability of purchasers, including first-time buyers, to be able to buy a new home. Yes, it is certainly a small step in the right direction, in terms of the removal of barriers to lend, but until the bigger issue is resolved, namely the restrictive loan to income multiple caps, then actually, the scrapping of these affordability tests does very little to help people wanting to buy, or be able to borrow more money to do so. It does, in theory, marginally widen the pool of people now eligible for a new mortgage, but certainly for first-time buyers at least, it still does not go anywhere near far enough to help those trying to buy their first home. With a lack of governmental schemes available for purchasers and the Help To Buy scheme due to come to an end early next year, first-time buyers will still be relying heavily on the bank of mum and dad, or some other profound means to help raise enough deposit get themselves onto the property ladder.

The removal of the stress test will allow some lenders to be more innovative in how they stress affordability. However, maximum loan to income multiple rules will remain and so I don’t expect to see much change. The client who called me this morning wanting 7x income was most disappointed. I would also question why the rules are being relaxed at a time when we have increased rates and increased living costs: should borrowers really be encouraged to borrow more at this time?