The Bank of England is understood to be considering softening mortgage affordability checks as part of a review of market restrictions that concludes next week.
The central bank is said to be considering a reduction to the additional interest rate charge which is used to test borrowers’ ability to pay the reversion rate after an initial deal.
This rate is currently set at 3% more than the bank’s standard variable rate.
The checks are designed to make sure borrowers aren’t too vulnerable to potentially higher interest rates in the future.
However, interest rates have stayed at record low levels for far longer than had been anticipated when the rules were brought in back in 2014 – meaning that a 3% rise in the base rate now seems far less likely.
Independent mortgage broker Gareth Ware said: “Affordability remains a key stumbling block for many looking to get on to the property ladder.
“However, this move represents a risk when the market is already running hot. House prices are currently rising by double digits annually and this move will not help cool the market.
“As with most regulatory changes the devil will be in the detail.”
Last week figures from Nationwide revealed that UK house prices had returned to double-digit growth in November with homes now valued at 15% above pre-pandemic prices.
Prices were up 10% in November, slightly higher than the 9.9% recorded in October, with the average price of a UK house now standing at £252,687.
