First-time Buyers
Bank of England seeks stricter mortgage rate tests
Mortgage applicants could face stricter affordability tests as part of an increasing focus by financial stability regulators on underwriting standards, the Bank of England has revealed.
The central bank’s Financial Policy Committee, which already has the power to tell lenders to adjust loan-to-value lending, aims to extend its control to altering projected interest rates in lenders’ affordability tests.
It has asked the Financial Conduct Authority to consult on the proposal.
Bank of England governor Mark Carney told a press conference today: “Depending on the result of that consultation, we expect banks and building societies will be in a position that if the FPC decided to give guidance to use a higher interest rate, they will be able to implement that.”
The FPC, which was created this year and includes FCA chief Martin Wheatley, can already recommend lenders hold more capital to protect themselves against exposure to sectors where there is a perceived risk, such as higher loan-to-value mortgages and commercial lending.