Securing a mortgage just became a whole lot easier. The mortgage affordability rule is coming to an end.

Securing a mortgage just became a whole lot easier. The mortgage affordability rule is coming to an end after eight years in use, and it’s opening doors for a lot of people. As a matter of fact, it is opening the door to their new homes.

In this article, we’re going to arm you with everything you need about these changes and the new checks that lenders will be made to measure your availability for a mortgage. So, sit back, grab a brew, and discover how better mortgage rates have just become available for you!

What Is the Mortgage Affordability Rule?

Also known as the ‘Affordability Assessment’, it was a set of guidelines that lenders used to measure the amount of money you could borrow as a mortgage. The way that it worked was that a lender would analyse your income vs your expenditure and calculate whether you had enough surplus cash to pay for your mortgage if interest rates were to suddenly rise.

For example, let’s say your mortgage repayments work out at £750 a month. The bank would ask for proof of your income as well as a breakdown of your expenditure. So, let’s say you take home £2,500 a month and your total expenditure is around £1,000. This shows the lender that once you have made your mortgage repayment you are still left with £750 a month surplus cash, which is more than enough to pay off your debt.

However, this wasn’t the part that has been causing issues. The part that was scrutinised was the ‘stress test’. This was where lenders would add an additional 3% to your monthly repayments to account for them raising their rates in the event of a financial crisis. This test caused some people to be refused mortgages, even though they could afford the monthly repayments at the time.

What Does the Removal of The Mortgage Affordability Rule Mean for You?

The method of measuring your income against your expenditure is staying the same, but lenders are removing the stress checks. This eases the pressure from people who are looking to get a mortgage and makes applying for one easier.

Banks will no longer be looking through the lens of a ‘worst-case scenario’ basis. This means that people who were previously told they couldn’t afford repayments will have a second chance. These repayments are a lot less intimidating when they have 3% knocked off them each month, especially for more expensive properties.

Why Was the Mortgage Affordability Rule Created?

You won’t be blamed for wondering why such a difficult rule was implemented. It came about in 2014 after banks decided they needed a way to avoid another financial crisis, like the one we had in the 2007 Credit Crunch.

Banks didn’t want to start handing out mortgages to people who could ‘only just afford them’, so they introduced the stress test as a backup. If the worst-case scenario ever did happen, then people would still be able to pay off their loans. The problem was that this worst-case scenario was very unlikely, and the banks' pessimistic outlook made it harder for people to get on the property ladder.

A No Could Soon Become a Yes

This is great news for anyone who is looking to buy a new home, especially if they have previously applied for a mortgage and have been told no. We work with a brilliant mortgage broker who is skilled at finding fair rates, especially for people who believe themselves to be unmortgageable. You never know what you can borrow until you check, so contact us today by clicking here, and we’ll put you in touch.

With more people being able to borrow, now is the perfect time to sell your home.

If you don’t need to speak with a mortgage broker to buy a property, but you do need to speak with a trustworthy estate agent to sell one, then book your free valuation with us by clicking here.