You are here: Home - Mortgages - First Time Buyer - News -

Up to 10% of mortgage applicants could fail affordability test amid Base Rate hike

0
Written by: Tim Chen
09/11/2017
An estimated 5-10% more applicants who would have qualified for mortgages will likely fail stress tests due to rising Standard Variable Rates (SVRs).

Increases in lenders’ SVRs following the November Bank Base Rate (BBR) rise to 0.5% from 0.25%, will make mortgages even more inaccessible to aspiring homeowners, according to Richard Rowntree, managing director of UK Mortgages at the Bank of Ireland.

Speaking at the UK Finance Annual Mortgage Conference this week, Rowntree said: “Because we now need to stress at 3% above SVR, with base rate SVRs increasing – that’s likely to increase even further and exacerbate this problem. So we’re likely to see another 5-10% of those who would’ve been able to pass our affordability stress tests now failing because we’re having to link [affordability] to a higher SVR.

“And that’s all responsible and that’s all great, but it doesn’t get away from the fact that when you look at the number of those who own their own homes in that bracket of 20-29, it has reduced significantly,” he continued.

The statement comes in the context of stagnating income levels, leaping house prices, and rising consumer dissatisfaction with affordability.

Earlier this year, over 180,000 people signed a petition demanding that parliament debate whether rental payments should be considered as a measure of affordability.

“For the person on the street who’s actually sitting there thinking ‘I’m paying more in rent than I would do on a pay-rate for a mortgage, and that’s been the case since 2008 – I’ve been paying off my landlord’s mortgage, and that’s not fair’, I understand that, I get that,” said Rowntree.

However, he added that renters simply aren’t aware of the stress tests imposed by affordability regulations.

“The gap [of stress testing] is what’s not seen, and not necessarily explained by brokers and lenders alike,” he said.

And the responsibility is on both the public and private sectors to close that gap in awareness and affordability, Rowntree said.

“The government can’t solve this on its own – we certainly can’t solve it on our own from a private perspective.”

“Something else needs to happen, tenure needs to change, or we need some other mechanisms to support those who want to get their feet on the housing ladder earlier,” he added.

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Are you a first-time buyer looking for a mortgage?

Look no further, get the help you need by searching for your perfect mortgage

Five ways to get on the property ladder without the Bank of Mum and Dad

A report suggests the Bank of Mum and Dad is running low on funds. Fortunately, there are other options for st...

The essential Your Money guide to the April 2018 tax changes

As we head into the 2018/19 tax year, a number of key changes take place to existing policies while some new i...

A guide to switching energy provider

All you need to know about switching from one energy supplier to another.

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

Having a baby and your finances: seven top tips

We’re guessing the Duchess of Cambridge won’t be fretting about maternity pay or whether she’ll still be...

Protecting family wealth: 10 tips for cutting inheritance tax

Inheritance tax - sometimes known as 'death tax' - can cause even more heartache for bereaved families. But th...

Travel insurance: Five tips to ensure a successful claim

Ahead of your summer holiday, it’s important to make sure you have the right level of travel cover or you co...

YourMoney.com Awards 2018

Now in their 21st year, our awards recognise the companies offering the best products and services to consumers

Money Tips of the Week

Read previous post:
Utility costs rise at triple the rate of inflation

The cost of utilities has risen at almost triple the broader rate of inflation for the typical UK household in...

Close