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Bank of England withdraws mortgage affordability test
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LONDON (Reuters) – The Bank of England said on Monday that its Financial Policy Committee would withdraw its mortgage affordability test recommendation following a review of the mortgage market.
LONDON (Reuters) – The Bank of England said on Monday that its Financial Policy Committee would withdraw its mortgage affordability test recommendation following a review of the mortgage market.
The withdrawal will come into effect from August, the BoE said.
The central bank introduced the test in 2014 to ensure that borrowers do not become a threat to financial stability by taking on debt they could not afford to repay.
The BoE said its loan-to-income “flow limit” would not be withdrawn and, alongside other affordability assessments, would help to protect the financial system in a simpler, more predictable and more proportionate way.
(Reporting by Kylie MacLellan, writing by Muvija M; Editing by William Schomberg)
A mortgage affordability test is a financial assessment used by lenders to determine if a borrower can afford to repay a mortgage based on their income and expenses.
The Bank of England is the central bank of the United Kingdom, responsible for setting monetary policy and ensuring financial stability in the economy.
Financial stability refers to a condition in which the financial system operates effectively, with institutions able to manage risks and absorb shocks without significant disruption.
The loan-to-income ratio is a financial metric that compares a borrower's total debt obligations to their income, helping lenders assess the borrower's ability to repay loans.
Affordability assessments are evaluations conducted by lenders to determine whether a borrower can meet their repayment obligations based on their financial situation.
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