Anyone looking to purchase a property soon has been warned over a major change to mortgage rules that is set to come into effect from the start of next week.
From Monday August 1, buyers could get access to a bigger loan after The Bank Of England confirmed that they will be dropping an affordability test, reports Birmingham Live. It is great news for buyers, as the current rules mean that they need to follow a test that will prove that they can pay a rate that is three percentage higher than the reversion rate.
But now the bank has decided to completely scrap the test - which could lead to prospective buyers being able to take out a bigger mortgage.
The loosening of the mortgage rules will come as welcome news to borrowers who have been struggling to meet the affordability criteria, particularly following the current cost of living crisis.
Chris Sykes, technical director at Private Finance, said it was “great news for borrowers that were becoming increasingly tight on affordability and it is limiting their borrowing power with each change to affordability calculators”.
Mark Harris, chief executive of mortgage broker SPF Private Clients, said: "For example, first-time buyers who have been affording rents far in excess of actual mortgage payments but have failed affordability assessments regardless.
Gemma Harle, managing director at Quilter Financial Planning, spoke out over the changes. She said: "One of the main drivers behind "generation rent" is the fact that house prices have massively outstripped wage growth.
"Due to high house prices, first-time buyers also need very sizable deposits. On top of this, inflation will be eating away at any other savings they have sitting in cash."
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