Homeowners are being forced to prove they can afford mortgage rates of up to 8 per cent as lenders tighten their stress tests.
Banking giant TSB became the first High Street name to announce it was boosting its affordability checks yesterday amid concerns the Bank of England could hike its base rate to 6 per cent.
Brokers warn that other banks will follow suit as some say they are already seeing more borrowers being rejected for poor credit scores.
Stress tests: TSB became the first High Street name to announce it was boosting its affordability checks amid concerns the Bank of England could hike its base rate to 6%
It comes after figures showed mortgage rates had jumped by a whole percentage point in the ten days after the Chancellor’s mini-Budget.
Yesterday, TSB confirmed it was increasing its stress tests to 8 per cent for existing homeowners and 7 per cent for first-time buyers.
David Hollingworth, of mortgage broker London & Country, says: ‘Not every lender publishes what level they are stress-testing borrowers at, but TSB won’t be the only one. In the future, stress-testing will inevitably have to take into account higher interest rates and higher cost of living.’
Chris Sykes, technical director of Private Finance, says: ‘Recently we have noticed an abnormal amount of credit score declines from lenders.
‘In light of rising interest rates, it could be the case that they are being stricter with credit scores and ensuring borrowers can repay their loans.’
The average two-year fixed-rate mortgage is now 5.97 per cent — the highest level in 14 years, according to analysts at Moneyfacts. It is likely to top 6 per cent in the coming days.
