It is four months since the changes made by the Mortgage Market Review (MMR) came into play, and one lender has already increased measures to tighten its criteria.
Barclays has now increased its ‘stress test’ mortgage rate to 6.99 per cent from 6.74 per cent. The stress test is used as an indicator to check whether borrowers can still meet their mortgage repayments should interest rates increase to the figure specified by the lender.
This comes shortly after the MMR came into effect earlier this year, on 26 April. Recent figures from the Council of Mortgage Lenders (CML) show that gross mortgage lending was 13 per cent higher in August than at the same time last year.
August figures show lending has reached £18.7bn, which is 5 per cent lower than July’s £19.7bn, but still the highest lending total for the month of August since 2008 when it hit £19.3bn.
An increase in house purchases has continued steadily throughout the year, but the slight slowing of activity for the month may be a result of the tighter lending rules and the continued stress testing.
Alan Cleary, managing director of specialist lender Precise Mortgages, said of stress testing, “It has an impact on borrowers because it could reduce their loan size.”
But have the tests meant a change in the mortgage landscape? Mr Cleary added that the MMR affordability testing has not affected business because the firm has been stress testing since 2010 using a 2 per cent stress. “We then upped it to 2.79 per cent on the MMR date in April. If there has been a change, it is marginal – probably only 3 or 4 per cent of customers may have been affected.”
“If there were lenders that were not stressing before MMR, they may have seen a much greater impact.”
Regarding whether there should be a uniform level to stress test at, he added that it all depends on the rates the client is borrowing at. “It needs to be different for each customer,” he said.
charlotte.richards@ft.com
