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If you’ve ever made steps towards getting on the property ladder or require a higher loan-to-value mortgage, you’ll likely welcome this change. The move will be a great boost to a number of first-time buyers in securing a home.
Originally introduced as a safeguard to protect borrowers, the test involved ensuring they could manage mortgage commitments if interest rates rose by 3%. Many consider the affordability test one of the biggest challenges in getting a mortgage.
With current rising interest rates and variable rates from lenders, the test would mean applicants today would need to be able to afford interest of 7%.
The cancellation comes into play from 1st August. Lenders will then assess mortgage applications using the Loan-To-Income (LTI) flow limit and the FCA’s Mortgage Conduct of Business (MCOB).
This means that banks will have more flexibility in lending to lower income borrowers, increasing the potential of first-time buyers in the market.
Applicants with higher credit ratings will be most likely to succeed, with lenders using discretion for approval. Lenders still have a duty of care with internal risk assessments, and the LTI flow limit reduces the number of borrowers to a 4.5 ratio, whilst The MCOB regulates home purchase plans.
With many first-time buyers out there, it could be the early bird who catches the worm, if you’re looking for a mortgage to suit your needs, it’s a great time to prepare your finances.
We’re still assisting first-time buyers and those requiring a mortgage on a daily basis. We’d be very happy to put you in touch with one of our independent financial partners, who can offer an informal, over-the-phone chat to discuss your needs and requirements.
If you’d like us to help, simply contact your local branch and we can pass you on to a trusted advisor.
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