Four of the UK’s largest mortgage lenders have announced changes to their affordability criteria that could significantly increase how much borrowers are able to secure.
From today Halifax, Lloyds Bank, Bank of Scotland and BM Solutions have adjusted the stress rates used in their mortgage affordability assessments – a move that could allow typical households to borrow up to 13% more.
The move comes as the housing market continues to adjust to a higher interest rate environment and cost-of-living pressures, with lenders seeking to maintain responsible lending while helping more customers onto or up the property ladder.
REVISED STRESS TEST
The revised stress test, which forms part of lenders’ checks to ensure borrowers could continue repayments if interest rates rise in future, is being lowered across standard and enhanced affordability calculations.
The changes apply to new applications from first-time buyers, home movers and those remortgaging and are expected to improve access to lending for a wide range of customers.
Under the new criteria, a typical household earning £75,000 a year with two children and a 25-year mortgage term could see their maximum borrowing increase by more than £38,000 – rising from £286,005 to £324,520 on products fixed for less than five years, and from £317,500 to £331,785 on longer-term fixed deals.
BRILLIANT NEWS
Amanda Bryden, Head of Halifax Intermediaries, said: “This is brilliant news for many would-be homebuyers who have struggled to either get on or move up the housing ladder, or those simply looking to get a better mortgage deal.
“It is always a careful balance when calculating whether a loan is affordable both now and in the future. While they are just one part of measuring affordability responsibly, the application of these new Stress Rates means a typical family could potentially borrow over £38,000 more and make it easier to turn their dream home into a reality.”
