‘Devil will be in the detail’ on tightening affordability rules

Mortgage Introducer

June 28, 2017

The ‘devil will be in the detail’ when it comes to the Bank of England’s recently announced tightening of mortgage affordability rules for lenders, which were announced earlier this week.

That was the view of Adrian Moloney of OneSavings Bank, who was speaking at a panel debate taking place at today’s Financial Services Expo Wales.

“As far as I’ve seen there is no implementation date on these changes,” he said. “It said it would affect 0.5% of all applications in 2016 so it would not appear to have a major effect. The challenge of course will be around affordability and lenders will have to review their affordability stress test levels.”

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John Coffield of Paradigm Mortgage Services said that he did not believe the changes were as a result of issues in the mortgage industry.

“This appears to be a decision driven by rising levels of consumer debt at the moment,” he said. “Consumer debt – excluding mortgages – is around £240 billion, the bulk of which is driven by car finance and the like. This is more about consumer debt but is spilling into the mortgage market; I don’t think there’s a massive issue here for us.”

Other topics under discussion included the recent 5-3 vote by the Monetary Policy Committee to hold rates at 0.25%, and whether this provided a signal that rates would be increased in the near future.

Ian Carswell of BM Solutions said he did not believe now was the right time to raise rates, adding: “Personally I think it would be wrong to do it now but I could certainly see an increase in 2018.”

Adrian Scoutes of Nationwide said there was clearly still a reluctance to raise rates, given recent comments from Bank of England Governor, Mark Carney.

“We have effectively got used to an abnormal position in terms of interest rates over the last seven/eight years,” he said. “I still think there is a reluctance to do too much on rates while we have all the ‘Brexit’ negotiations in the melting pot.”

John Coffield suggested that product rates were still incredibly competitive, especially when compared to SVRs offered by many lenders.

“I would urge advisers to look at their existing client bank,” he said. “Far too many clients are on SVRs or about to go on SVRs. Bank Base Rate will only go up and therefore clients may well want to fix for as long as they can.”

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