Is the market about to be super-charged by the removal of mortgage affordability tests?


When there’s been a recent crash, lenders are generally super cautious and bring-in a raft of measures to make sure it doesn’t happen again. One of these are strict affordability criteria applied to new mortgage applicants. Whilst annoying for those who have lower deposits who now struggle to find a lender who considers them an acceptable risk, it does keep some sort of control on the demand for homes and some sort of check on house prices which might otherwise get out of control.

As time goes by however, the banks’ memories fade, their balance sheets start to look healthy once again and the very measures that protected them in the crisis now seem limiting. They start to believe the once sensible restrictions are now getting in the way making more profit!

For someone who’s lived through a couple of crashes, it then starts to sound a bit familiar. One major indicator I believe, that we’re entering the last phase of a prolonged period of property price growth is the removal or easing of lending criteria by banks. So would you believe it, on 28th Feb a consultation was launched by the Bank of England on whether it might be time to lift some of the lending criteria restrictions imposed back after the last crash. A decision will be made in May.

If they decide to remove the restrictions and make borrowing easier, watch out! We could well be seeing a super-charging of the property market yet further and an inching closer to the end phase of the boom.

Subscribers to the 18-year property cycle model will certainly be watching with great interest as by rights, they’d be expecting a 2024/5 crash and this would tie-in rather nicely with that prediction.

Whatever your view, if quick profit is your aim then it’s more important than ever right now to apply a bit of caution, do your research and buy sensibly. Keeping an eye on news like this is important. Ultimately property is best viewed as a long term investment and the stats clearly show that if you invest on that basis, you shouldn’t go too far wrong over the long term.