Mortgage borrowing rules have been eased after the Bank of England scrapped an affordability test.
But other rules such as strict loan-to-income limits will not make it easier for most people to get a mortgage."Scrapping the affordability test is not as reckless as it may sound," said Mark Harris, chief executive of mortgage broker SPF Private Clients. In other words there will not be an immediate impact for borrowers as lenders will not need to change the way they assess loans.Mark Yallop, chairman of the Financial Markets Standards Board, said although the change would make it "slightly easier" for some borrowers to get a mortgage, he did not think with would have a significant impact.What was the scrapped test?
Lenders had to not only work out if borrowers could afford a mortgage at the rate they were being offered, but also work out how they would be affected if interest rates soared by 3%.Borrowers who could not prove they could cope with such an eventuality might have been turned down for a loan on that basis, even if they could easily afford a mortgage at the existing rate.
In short, it is very rare that a lender will consider a higher loan-to-income ratio because of the restriction.
Couldn't that lead to another backing crisis?
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