Abbey, one of the UK’s largest lenders, has introduced stricter criteria to calculate how much new customers can borrow.
The lender told brokers it was increasing the interest rate it used to assess affordability to 7%. Typically the bank uses its standard variable rate – currently 5.44% – to calculate what an applicant’s monthly payments would be before it approves a new loan.
New borrowers must now be able to prove they could afford their mortgage at a rate of 7%. The move is designed to prevent customers taking out mortgages they may be unable to afford when interest rates rise from their current 50-year low of 2%.