Mortgage Affordability Test Scrapped By Bank Of England
Mortgage borrowing rules have been eased after the Bank of England scrapped an affordability test.
The "stress test" forced lenders to calculate whether potential borrowers would be able to cope if interest rates climbed by up to 3%.
Removing the test may help some potential borrowers get loans, such as the self-employed or freelance workers.
But other rules such as strict loan-to-income limits will not make it easier for most people to get a mortgage.
The withdrawal of the affordability test was announced in June but has come into effect on Monday.
The mortgage affordability test was introduced in 2014 as part of a widescale tightening up of the mortgage market to ensure there were no repeats of the mis-selling scandal that partially contributed to the 2008 financial crisis.
The rule was put in place to ensure that borrowers did not become a threat to the financial stability of lenders by taking on debt they subsequently might not be able to repay.
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%.
There are some key protections in place to help ensure that borrowers don't take on loans they may not be able to afford.
The main one is a loan-to-income "flow limit" which limits the number of mortgages that lenders can grant to borrowers at ratios at or greater than 4.5 the borrowers' salary.