January 17, 2022

UK: Industry reacts as BofE plans to relax affordability checks

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Industry reacts to the news that the Bank of England plans to relax mortgage affordability checks:

Bank of England may relax mortgage affordability checks to make it easier to borrow – but experts warn the move will stoke house price inflation

  • Bank could lower ‘reversion rate’ lenders use to assess mortgage applicants
  • This is used to check the borrower could still pay their mortgage if rates rose
  • Test was brought in post-financial crisis to avoid another housing bubble 
  • However, some say it is too strict in today’s low interest rate environment 

Above: thisismoney.co.uk

From James Lockett, ProperPR

Lee Martin, Head of UK for Unlatch says:

“We’ve seen the huge impact that such sustained levels of mortgage affordability have had in driving buyer demand in recent times and this has helped keep house prices buoyant despite the wider turbulence of Brexit and, more recently, the pandemic. 

However, with whispers of an interest rates increase on the horizon, we could soon see house prices dip as the number of buyers entering the market reduces. 

Relaxing affordability checks is certainly one way to offset this potential decline and it would continue to entice buyers to borrow more and buy bigger. Of course, if property prices hadn’t seen such consistently high rates of growth, to begin with, then it’s fair to say that such measures wouldn’t be required in the first place. 

By dangling yet another carrot under those noses of the nation’s homebuyers, it’s likely that prices will increase further and affordability will continue to be an issue for many.”

NOTES:

  • Unlatch was launched in Paris in 2018 and founded by Thomas Rivoire, Francois Marill and Olivier Adam
  • Raised 6m Euro in funding including from a consortium of French Notaries and AXA Venture Partners
  • Expanded internationally in Belgium in November 2019, Spain and Portugal in May 2021 and the UK in October 2021
  • Lee Martin, Head of UK, has 20 years new homes experience and founded Preston Bennett which became part of Hamptons International when Lee sold the business to them in 2017
  • Track and access sales progression milestones and comms 24/7
  • Automate and populate all legal sales documents
  • Create reservations and take payments digitally
  • CRM and analytics features
  • Reduce offer to exchange time by 29 days (French data)
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