Don't let that bubble deflate!

Faced with the spectre of reducing loan to income (LTI) rates as interest rates start to climb and thaus causing house prices to drop as borrowers are faced with being able to borrow less on their income, the Bank of England has decided to move the goalposts. The “affordability test” will be scrapped and the LTI rate fixed at its current rate of 4.5.

However, we need not worry, because, according to the BoE,

“the LTI flow limit without the affordability test, but alongside the wider assessment of affordability required by the FCA’s Mortgage Conduct of Business (MCOB) responsible lending rules, ought to deliver the appropriate level of resilience to the UK financial system, but in a simpler, more predictable and more proportionate way,”

Yeah, right! The article goes on to say,

“When (the) two mortgage recommendations were introduced eight years ago, it was to help guard against a significant increase in household indebtedness that may make any economic downturn worse.”

So now we are scrapping one of them, just as we are, er, heading into an economic downturn.