UK mortgage lenders will no longer need to check that homeowners could pay their mortgage payments at higher interest rates after the Bank of England’s affordability recommendation was withdrawn. The test will no longer be required from August 1.
The affordability test was one of two safeguards first introduced in 2014. It was brought in to avoid buyers borrowing more than they could afford, or spiralling into debt in the event of rapidly rising interest rates.
Previous recessions, such as the 2007 credit crunch, have shown that in an economic downturn households with the most debt are more likely to cut spending sharply. This has the effect of amplifying economic downturns.
