This Little-Known Rule Change Will Let You Buy a Bigger Home


This means a buyer would need to have a net monthly salary of £2,862 to qualify. For a split-income household, that would mean an annual income of £40,000.

If lenders choose to lower their stress tests to SVR plus one percentage point, a borrower would only be tested against a mortgage rate of 5.75%. This means they would only have to be able to pay monthly installments of £1,384 to take out the same mortgage, which is £278 less per month.

But there are several other moving parts in the equation. Soaring inflation means that if a buyer decides to wait, they could also see their borrowing power reduced because the bank will have increased their calculations of their expenses.

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The Bank of England is also expected to make further rate hikes, which will drive mortgage costs even higher, and the level at which buyers are stress tested.

And lenders may not decide to reduce their stress tests to the FCA’s minimum benchmark.

Lucian Cook, of Savills estate agents, said: “I think a number of buyers will be waiting to buy now, given that they will only have to wait until August and the test of resistance is an arduous obstacle.”

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So should we wait or buy now? We’ve broken down the numbers for three different scenarios.

Inflation bites – and take home pay goes down

Currently, lenders are using official data that is lagged, so they don’t yet take into account the very high rate of inflation. If a mortgage provider adjusts their calculations for 9% inflation, the buyer’s monthly outlay in their mortgage calculations would drop from £1,200 to £1,308.

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This means that a couple with a monthly net salary of £2,862 would be able to afford monthly mortgage payments of £1,554.

That would be £170 more than the £1,384 a month a lender would charge, had they lowered their stress test to 5.75pc, or SVR plus a percentage point based on current interest rates.

The surplus is money that the buyer could use to take out a larger mortgage. Sarah Coles, of Hargreaves Lansdown, said: ‘That would mean you better wait.



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