Economy news September 27, 2016
     

Interest rate cut makes mortgages more affordable

When the Bank of England decided to cut interest rates in August, the main aim was to make the cost of borrowing cheaper. A less-reported side effect is that it also helps consumers borrow slightly more.

A while ago the Prudential Regulatory Authority brought in rules to ensure that lending wasn’t purely based on the record low interest rates we’re currently enjoying. If it were, many people could find themselves in serious difficulties when interest rates eventually rise. 

When assessing affordability, lenders are required to check that the loan would still be affordable if rates increased by 3%. This is what they call the “stress rate” and will typically be 3% above the lender’s Standard Variable Rate - even if the actual deal you’re applying for is much, much lower.

Of course when the rule came in no-one expected Base Rate would in fact fall further. But that’s what’s happened and so you could borrow slightly more today, than you could in July. That’s not just theory – a number of lenders have announced reductions to their stress rates, including big names like Barclays and Nationwide.

In real terms a 0.25% reduction to the stress rate isn’t going to make a huge difference to the amount you can borrow but anything that helps buy your dream home is good news.


End of Help to Buy

Halifax Relaxes Interest Only Criteria

Starter Home Initiative

Fee Free Mortgages

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Hurfords is a trading name of Sharman Quinney Holdings Limited which is registered in England and Wales under company number 4174227, Registered Office is Cumbria House, 16-20 Hockliffe Street, Leighton Buzzard, Bedfordshire, LU7 1GN. VAT Registration Number is 500 2481 05.

For activities relating to regulated mortgages and non-investment insurance contracts, Sharman Quinney Holdings Limited is an appointed representative of Connells Limited which is authorised and regulated by the Financial Conduct Authority. Connells Limited’s Financial Services Register number is 302221.

IMPORTANT: If you are selling a residential property in the UK that is not your primary residence, you should check your capital gains tax liability. Find some useful links to more information here.

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