Rising inflation, caused by increasing gas prices and a continued shortage of consumer goods has influenced the latest Bank of England Base Rate rise that took us to 1.75%. But the effect that this will have on borrowers isn't clear-cut and differs from individual to individual. Another factor that should be taken into consideration is the 1st August removal of the 'Stress Test' criteria.
Since 2014 lenders were required to check affordability by 'stress testing' applications using criteria to guard against people taking on too much borrowing in light of the 2007-2008 financial crisis.
Until 1st August borrowers still had to afford their mortgage repayments if the rate increased to 3% above the lender's standard variable rate but in February the Bank of England revealed that mortgage 'Stress Testing' could have caused around 6% of borrowers (30,000 per year) to take out smaller mortgages than they would have been able to afford and expressed “concerns” with how the affordability test has operated.
By removing the stress test limit the Bank of England has effectively made it easier for borrowers to access mortgages and, whilst the loan-to-income ratio remains (Banks and building societies are still restricted on how much lending they can do above 4.5 times salary) lenders can now assess applications on a case-by-case basis. This could mean that more first-time-buyers are able to overcome lending barriers.
Important information
Your home may be repossessed if you do not keep up repayments on your mortgage.
There may be a fee for mortgage advice. A fee of up to 1% of the mortgage amount may be charged depending on individual circumstances. A typical fee is £395.