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Renters may find mortgages easier to get

Rental tenants who apply for mortgages costing less than the rent they are paying have been turned down on the basis of affordability. That could soon become a thing of the past.

Tory leadership hopeful Liz Truss has said she wants rent payments to be included within credit-worthiness and affordability assessments. This, she said, would break down barriers faced by ‘generation rent’ when trying to buy their first house.

Most would be able to afford a mortgage but do not qualify for one under lenders’ affordability assessments.

This, said Truss, is wrong (she also wants to scrap the Government’s current commitment to build 300,000 new homes by the mid-2020s in favour of reduced planning hurdles and working with local communities to identify sites ripe for redevelopment).

But changes look set to be made whether or not Truss becomes the next Prime Minister.

The Bank of England’s Financial Policy Committee has withdrawn its affordability test ‘recommendations’, effective from 1 August.

Introduced in 2014, these included a ‘stress test’ in which the ability to pay at mortgage interest rates above the current rate was assessed.

However, the loan to income (LTI) limit on the number of mortgages that can be extended to borrowers in excess of 4.5 times their income has been retained.
The recommendations, said the committee, were originally introduced to guard against a loosening in mortgage underwriting standards and a material increase in household indebtedness. But with house prices rising sharply, it now considers the LTI restriction more important than the ‘stress test’.


• The next Prime Minister must tackle the supply crisis in the private rented sector in Yorkshire and the Humber if homeownership ambitions are to become a reality, said the National Residential Landlords Association last week.

New survey data shows that the rental supply and demand imbalance in the region is likely to worsen again next year. Some 28 per cent of landlords in Yorkshire and the Humber plan to cut the number of properties they let in the next 12 months. Against this, 78 per cent of landlords in Yorkshire and the Humber reported increased demand for rental housing in the second quarter of the year.

‘The next administration needs to reset its plans for the sector and demonstrate support for both landlords and tenants across the region’, said Yorkshire and the Humber NRLA spokesperson Ruth Millington.