Following the recent changes in affordability calculations that pushed many mortgages out of the reach of those who could have afforded them last year, the Bank of England has this week scrapped their ‘stress interest rate recommendation’, originally designed to avoid another 2007-style credit crunch

This does not mean however that lenders will no longer have to check whether homeowners could afford mortgage payments at higher interest rates, they will still need to check this, but will be more flexible on the rate they stress test against.

The change follows their decision that the other measures in place by which lenders calculate mortgage caps should be enough to provide confidence that households won’t be risking unwarranted debt. Whilst some might find this surprising news, given that the Bank of England increased interest rates multiple weeks in a row during June, the central bank said in a statement that those other rules

“ought to deliver the appropriate level of resilience to the UK financial system, but in a simpler, more predictable and more proportionate way”

The decision doesn’t mean that banks will automatically be changing their calculations, but it may provide additional options to those looking to borrow over the coming months.

If you’re unsure if this change will affect you, get in touch with one of our independent mortgage advisers and we’ll help you understand the changes.

What should I do?

If you are considering a mortgage/remortgage in the next 6-12 months – you really need to start considering all the options available to you – acting promptly could save a lot of money in the long run. Our advisers can recommend the best course of action for you, and in some instances, where you are concerned about interest rate rises and it is a
suitable option for you, may be able to lock in a lower rate for you way before you are due to remortgage.