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Are Lenders Changing Their Affordability Requirements?

Are Lenders Changing Their Affordability Requirements?

By Miranda Harding
Published 30 August 2022

As of August 2022, lenders will begin to relax affordability requirements. But what does that mean for prospective buyers?

Did you know that as of August, lenders will begin to relax their affordability assessments? Whilst this may not be the most glamorous mortgage news, it's more important than you might think. As lenders relax affordability tests, new buyers to market might be able to borrow more than they previously would - meaning that those previously priced out of the property market could get a leg up under the new rules. 

The "mortgage market affordability test" introduced in 2014 by the Bank of England was designed to make sure that borrowers didn't take on any debt that they couldn't afford. Now, the Bank of England is getting rid of the test - but what does it mean for first time buyers? We spoke to our resident mortgage guru, Elliot, to find out more.

Will lenders follow this change strictly?

I expect that some lenders will lower their own stress testing requirements which may give slightly more flexibility to borrowers with lower incomes or perhaps to those who earn a decent income but are finding that they're unable to borrow as much as they would like due to other commitments such as childcare costs. I don't think this will have much impact on the average homebuyer, as with the general increase in the cost of living most lenders will want to ensure they're not stretching homebuyer's budgets too far.

Will these affordability changes have a big impact on first time buyers?

Lenders already have their own loan-to-income restrictions in place alongside the affordability stress testings requirements that the Bank of England had in place. These caps won't be going anywhere as mortgage lenders still need to ensure that they are lending responsibly and that borrowers are able to afford their mortgage repayments. This is even more important at the moment where we are seeing regular increases to interest rates. So, it's unlikely that there will be a huge change for all first time buyers in terms of how much more they can now borrow.

What piece of advice do you have for those looking to boost their affordability?

If you're struggling to meet affordability requirements, I wouldn't rely on this news as a 'golden ticket' to being able to get the loan size you need for your dream place. Lenders will still follow their own loan-to-income restrictions to keep buyer's monthly mortgage payments affordable. Products such as Joint Borrower Sole Proprietor mortgages are designed to allow buyers to boost the amount they can borrow by adding a friend or family member onto their mortgage. This means that the lender can lend the buyer more, whilst ensuring that the monthly repayments would be affordable for them.

Book a call with a member of our team to discuss your situation further

Or learn more about how a Joint Borrower Sole Proprietor mortgage could boost your affordability.

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