The news that the Bank of England’s (BoE) Financial Policy Committee (FPC) intends to consult on withdrawing the affordability stress test in the first quarter of next year has been met with a range of opinions from market watchers.

Yesterday in its latest financial stability report, the FPC announced it had reviewed two market measures – the first being the limit on the share of new mortgages that can be lent at high loan-to-income ratios and the second being the assessment on whether a borrower could handle a mortgage rate increase 3 percentage points above their standard variable rate.

It states: “The FPC’s review found that the measure on lending at high loan-to-incomes was more effective at reducing risk in a housing boom, while also having less impact on borrowers in normal times.

“The FCA’s rules on affordability testing combined with the FPC’s loan-to-income limits should be enough to protect UK financial stability. This would also make the rules simpler.

“The FPC therefore intends to consult in 2022 Q1 on withdrawing its affordability measure.”

Trussle head of mortgages Miles Robinson notes the need for caution. “The rules were introduced in the wake of the financial crash to reduce the risk of homeowners accidentally taking on debt that could leave them vulnerable,” he says.

“As such, they are in place to protect homeowners from any volatility that can come from interest rate rises.”

He adds: “However, soaring house prices mean that younger buyers on average have to save for 10 years to secure the large deposits that are typically needed to access the housing market. As such, relaxing the rules just slightly could enable hundreds of thousands of first-time buyers to own their own home much more quickly.”

Habito chief financial officer Martijn van der Heijden believes this is “an improvement of method”. He explains: “Crude income multiples used across the board should hopefully make way for more intelligent approaches using borrowers’ true budgets and individual risks.

“Any new lending limits would also accept that the absolute levels of debt burden are lower at these low interest rates, than what was imagined when the previous rules were first set. Secondly, they are of course a reflection of where house prices in the UK have got to, in comparison to average wages.”

He says: “Affordability has been a huge issue for younger buyers for many years. With average British salaries now £31,285 and the average national house price being £270,000, we’re in a situation where the house price to income ratio is now 8.6 – falling way short of the current cap of lending 4.5 to 5 times income.

“While this relaxing of lending caps will help ease the burden on buyers for having large deposits, lenders will vary in their offering and will also continue to judge every application individually – so it’s unlikely that 6 times multiple will be accessible to everyone.

MSS chief commercial officer Rob Clifford comments: “This move ultimately means that it will be up to lenders to decide how they approach new applicants, handing them the power to determine their own assessments of affordability when offering terms to intermediaries and their prospective borrowers rather than imposing a top-down approach.

“It has the potential to open up the market to more buyers and moves away from the current situation which forced lenders and intermediaries to assume very high go-to rates that were highly unlikely to ever apply to that borrower.

“Clearly, lenders must remain prudent given the wider market backdrop and the prospect of rate rises in 2022 but this move should enable mortgage providers to more appropriately set their risk appetites and to carefully help more borrowers.”