The central bank said the change – which will take effect from August 1 – should not be seen as a “relaxation of the rules”. However, some commentators said that while the move would be welcomed by many, there was a risk that some people would take out mortgages they could not afford. The Bank has removed the requirement that borrowers could afford a three percentage point rise in interest rates before being approved for a mortgage. That stress test was introduced in 2014, after the 2007-08 financial crisis, and was part of a package of measures designed to prevent a repeat of the reckless lending that some say was rampant before the crash. The Bank said another rule that remains in place – which limits most new mortgages to a maximum of 4.5 times the borrower’s income – as well as separate affordability criteria set by the Financial Conduct Authority, “should provide the appropriate level of resilience in the UK financial system, but in a simpler, more predictable and more proportionate way.” The Bank previously said around 6% of mortgage borrowers – around 35,000 people – would have been able to secure a larger mortgage if the interest rate stress test had not been implemented. Claire Flynn, mortgage expert at comparison website Money.co.uk, said that given the cost of living crisis, the removal of the affordability test was likely to be seen by many as good news. He added: “This is because it could allow more people to get on the ladder as they can take out bigger mortgages. However, borrowers will still have to meet their loan-to-income ratio, which could prevent some from getting the mortgage they need to buy a home. “There’s also the risk that with fewer restrictions, some buyers will take out loans they can’t afford.” Myron Jobson, senior personal finance analyst at the Interactive Investor website, said releasing the measure amid the cost-of-living crisis “could run the risk of people biting off more than they can handle. [can] chew finances to buy a property’. Banks and building societies look at various aspects of people’s finances when deciding how big a mortgage they think someone can afford to take out, and traditionally the typical maximum for how much a person can borrow is 4.5 times the annual his income. This is commonly known as an income multiple. Subscribe to the Business Today daily email or follow Guardian Business on Twitter @BusinessDesk Banks can offer higher income multiples, but only on a set percentage of their lending. With house prices having risen sharply, Halifax and Barclays are among lenders to increase their income by up to 5.5 times for high-earning borrowers, while mortgage lender Habito will increase salary by up to seven times to some cases.
