Is scrapping a mortgage stress test a wise move right now?
This is Money Podcast
This is Money
4.1 • 650 Ratings
🗓️ 24 June 2022
⏱️ 55 minutes
🧾️ Download transcript
Summary
The mortgage industry has long bemoaned this supposedly unrealistic test that makes lenders check if borrowers can afford their repayments at a level higher than the fix or tracker deal they may be taking, their lender's standard variable rate plus 3 per cent.
Yet, isn't a bit of an odd time to finally get rid of this, just as interest rates are finally rising and the base rate has jumped from 0.1 per cent to 1.25 per cent in six months?
What's more, it's forecast by some to keep rising and go as high as 3 per cent by the end of the year - meaning almost that entire 3 percentage point rise the stress test uses.
On this podcast, Georgie Frost, Simon Lambert and Lee Boyce discuss why the Bank of England is doing this and whether it is the right move, or could lead to risky lending and even higher house prices?
Also, on this episode the team discuss inflation and how to at least try to do something to combat it with your savings - and also why investors are finding it so hard to buy the dip and be greedy when others are fearful in the inflation storm.
The renewed fervour for offering bumper deals on current accounts also goes under the microscope, but is a bung to join, an interest rate on your balance, or the ability to categorise your spending the best readon to switch?
And finally, you live in an end of terrace house, someone wants to build next door using your wall and making your home a mid-terrace, surely that couldn't be allowed?
Or would it?
Listen to the end to find out.
Transcript
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| 0:00.0 | Welcome to This Is Money Podcast. I'm Georgie Frost and joining me and editor Simon Lauer today is Deputy Editor Lee Boyce. |
| 0:10.0 | And coming up, the Bank of England will ditch the mortgage affordability stress test. |
| 0:14.1 | Will it help borrowers or usher in the return of irresponsible lending? |
| 0:18.3 | As inflation rockets to 9.1%, bad news for your savings, so |
| 0:22.3 | we'll help you at least find the best rates out there. Better news, though, in the current |
| 0:25.9 | account market. Is Nationwide's latest offering a sign of the return to proper in-credit |
| 0:30.9 | interest-paying accounts? Also today Simon asks, is now the time for investors to be greedy when |
| 0:36.1 | others are fearful, or should we hang |
| 0:38.1 | fire and we tackle troublesome neighbours. Not ours and thankfully not literally. Don't forget |
| 0:44.2 | you today with all the latest breaking money news just go to this ismoney.co.uk or download |
| 0:49.1 | the app. Market updates and conversations around the financial world don't have to be boring. |
| 0:54.9 | The Digest and Invest Podcast by Eatoro is a great way to tune into what's happening in a fun and easily digestible |
| 1:00.2 | format. Discover the Digest and Invest podcast at E-Toro.com forward slash academy forward slash podcasts. |
| 1:07.0 | But first, the Bank of England has announced that it will scrap the current stress test given to those wanting to get a mortgage. |
| 1:14.0 | Now, the mortgage affordability guidelines were introduced in 2014 to stop irresponsible lenders encouraging us to overstretch ourselves financially. |
| 1:22.4 | Borrowers have had to prove that they'd still be able to afford their mortgage repayments, even if their rate went |
| 1:27.5 | up to 3% above their lender's standard variable rate, which at the moment will be around 8%. |
| 1:33.4 | So what does it all mean? Can literally anyone get a mortgage now? Are we to return, Lee Boyce, |
| 1:39.8 | to the bad old pre-financial crash days? What's on what's happening when and why it's a it's a |
| 1:47.4 | funny decision this george isn't it it feels like uh in the backdrop of everything going on sky high |
| 1:52.2 | inflation base rate uh going higher soaring house prices uh svr rates going up very quickly |
| 2:00.0 | it all feels like a recipe of okay why are they timing this and doing this now? |
... |
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