{"id":184,"date":"2022-07-13T09:47:00","date_gmt":"2022-07-13T09:47:00","guid":{"rendered":"https:\/\/wordpress-1197097-5857112.cloudwaysapps.com\/?p=184"},"modified":"2025-11-21T09:38:51","modified_gmt":"2025-11-21T09:38:51","slug":"could-the-end-of-stress-testing-help-you-buy-your-first-home","status":"publish","type":"post","link":"https:\/\/strideup.co\/news\/knowledge\/could-the-end-of-stress-testing-help-you-buy-your-first-home\/","title":{"rendered":"Could the end of \u2018stress testing\u2019 help you buy your first home?"},"content":{"rendered":"\n<p class=\"wp-block-paragraph\">Why are people told they can\u2019t afford a mortgage when they spend more on rent? It\u2019s easy to feel cheated when you are rejected by a mortgage lender despite having a healthy salary. But did you know that controversial \u2018stress testing\u2019 might be the reason?<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">This August, the Bank of England is removing the stress test which forces buyers to prove they can afford the highest mortgage repayments in the event of soaring interest rates.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Experts hope the decision will have a positive impact on the accessibility of home financing and widen the range of mortgages available to first-time buyers.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">But what does this mean for the average first-time buyer? And with the UK in the midst of a cost of living crisis, is this decision irresponsible? In this blog post, we\u2019ll explain what stress testing is, how it works and how the withdrawal could impact you.<\/p>\n\n\n<section class=\"table_of_contents\">\n    <h5>Table of contents<\/h5>\n    <ul>\n        <li><a href=\"#section1\">What we heard at MTF 2025<\/a><\/li>\n        <li><a href=\"#section2\">The data confirms it: Our community is underserved<\/a><\/li>\n        <li><a href=\"#section3\">StrideUp&#8217;s model resonated deeply<\/a><\/li>\n        <li><a href=\"#section4\">More than a moment &#8211; a movement<\/a><\/li>\n        <li><a href=\"#section5\">The data confirms it: Our community is underserved<\/a><\/li>\n        <li><a href=\"#section6\">So, what\u2019s next?<\/a><\/li>\n    <\/ul>\n<\/section>\n\n\n<h2 class=\"wp-block-heading\"><strong>What is \u2018stress testing\u2019?<\/strong><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Since 2014, mortgage lenders have had to test whether borrowers could afford their mortgage repayments if interest rates were to rise during the first five years of their mortgage term. This test ensures borrowers could afford a 3% buffer on top of already high Standard Variable Rate (SVR) mortgages \u2013 rates most borrowers don\u2019t end up actually paying.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Every mortgage is subject to this test but most borrowers on fixed-rate mortgages for five years or more can sidestep these rules.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">For context, in <a href=\"https:\/\/www.theguardian.com\/money\/2022\/jun\/20\/average-svr-paid-by-uk-mortgage-borrowers-hits-highest-level-in-13-years\" target=\"_blank\" rel=\"noopener\">June 2022<\/a> the average two-year fixed-rate mortgage with a 10% deposit was set at 3.2%. The average SVR was 4.9% \u2013 the highest since 2009. These measures have led to fewer mortgage options for first-time buyers who cannot afford large deposits.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>What is it being replaced with?<\/strong><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Confusingly, there are actually two stress tests being used &#8211; the Bank of England one and another one from the Financial Conduct Authority (FCA). The FCA\u2019s stress test will remain \u2013 but to pass, buyers only have to prove they can afford 1% above SVR mortgage rates, rather than the 3% currently required by the Bank of England stress test.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The Bank of England has judged that the new rules will deliver the appropriate level of resilience to the UK financial system, in a \u201csimpler, more predictable and proportionate way\u201d.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Does this mean anyone can borrow any amount?<\/strong><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">In short, no.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Stress testing is used alongside caps in the ability to lend at high loan to income multiples and other responsible lending and financing rules. In practice, these caps are likely to be a bigger barrier to home ownership than the stress testing.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">For example, under UK guidance the maximum you can borrow is 4.5 times your income \u2013 so if you earn \u00a330,000 a year you could take a loan of \u00a3135,000.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Given the average house price in the UK in June 2022 was \u00a3271,613 \u2013 and most lenders require at least a 10% deposit \u2013 many first-time buyers will still struggle to buy a home with a traditional mortgage even after the stress test is withdrawn.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Origins of the stress test<\/strong><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">The stress test was introduced in 2014 by the Financial Policy Committee (FPC) after the financial crisis to prevent overborrowing and guard against home repossession and household debt.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The other recommendation introduced in 2014, the loan to income LTI \u2018flow limit\u2019, preventing buyers from borrowing more than 4.5 times their income, will not be withdrawn. As we\u2019ve seen, this has a much greater impact on people\u2019s ability to borrow than the stress test.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Since 2014, the test has been used in combination with caps on loan to income ratios, as well as other responsible lending rules. The test can also be combined with mortgage lenders\u2019 own restrictions depending on their individual appetite for risk.<\/p>\n\n\n\n<div class=\"custom_video custom_image wp-block-video w-full h-auto tabland:rounded-[32px] relative overflow-hidden\">\n    <div class=\"image w-full h-full max-h-[600px] tabland:rounded-[32px] overflow-hidden object-cover relative\">\n        <img decoding=\"async\" class=\"w-full h-auto\" src=\"https:\/\/strideup.co\/wp-content\/uploads\/2022\/07\/Image.jpeg\" alt=\"The Bank of England has recognised that its measure may be creating an unnecessary restriction in certain situations, particularly as the loan-to-income cap remains in place.\">\n    <\/div>\n    <figcaption>The Bank of England has recognised that its measure may be creating an unnecessary restriction in certain situations, particularly as the loan-to-income cap remains in place.<\/figcaption>\n<\/div>\n\n\n<h2 class=\"wp-block-heading\"><strong>Should I be happy or worried?<\/strong><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">It\u2019s hard to know exactly what the withdrawal of the stress test will mean for people looking for a home. Overall, it\u2019s likely to widen the range of mortgage options for customers and make it easier to get a first-time buyer mortgage and buy a home.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">However, there are some fears within the industry that as mortgages become more flexible and therefore more accessible to first-time buyers this could crowd the market even further, resulting in a continued rise in house prices due to nationwide scarcity of housing.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Gemma Harle, managing director at Quilter Financial Planning, <a href=\"https:\/\/www.financialreporter.co.uk\/bank-of-england-confirms-withdrawal-of-mortgage-market-affordability-test.html\" target=\"_blank\" rel=\"noopener\">said<\/a>:<\/p>\n\n\n\n<h2 class=\"wp-block-heading has-text-align-center stretched\"><strong>\u201cThis move by the Bank of England may illustrate that the long-term health of the housing market is predicted to be less than rosy, and this change is a means to guard against a real slump in house prices.\u201d<\/strong><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">In other words, the withdrawal of the stress test indicates that the government is expecting house prices to fall, and this may be a strategic ploy to keep the market buoyant.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>StrideUp\u2019s View<\/strong><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>\u201cAll mortgage lenders need to ensure their customers are likely to be able to afford the monthly payments \u2013 and this fact is not changing with the withdrawal of the FPC stress test. Nevertheless, by withdrawing it, the Bank of England has recognised that its measure may be creating an unnecessary restriction in certain situations, particularly as the loan-to-income cap remains in place.<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>At StrideUp, we understand the challenges and struggles people go through to own their home. Our product is designed specifically to help them buy earlier or buy better than a traditional mortgage allows. As the stress test withdrawal is adopted throughout the industry, we expect to be able to support even more people on our mission of building a more accessible housing market.\u201d<\/strong><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>No magic bullet<\/strong><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">To conclude, when the Bank of England stress test is withdrawn in August 2022, it\u2019s unlikely to cause a big stir. The loan-to-income cap remains, so there will still be limits on how much first-time buyers can borrow.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">But in this cut-throat housing market where people are desperately trying to afford their first home, we\u2019re hopeful that this news will mean more flexibility and more affordable mortgages for everyone.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Want to stay ahead of the trends in your local housing market? Follow StrideUp on socials today where we\u2019ll be posting the latest insights and blog posts.<\/p>\n\n\n<div class=\"special_separator flex justify-center my-8 middletab:my-14\">\n    <svg width=\"62\" height=\"12\" viewBox=\"0 0 62 12\" fill=\"none\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\">\n        <path d=\"M15.5 7.45938C15.5 3.30547 12.0854 -0.0560486 7.89524 0.000708303C3.98534 0.0537023 0.730931 3.14742 0.512121 7.03041C0.41249 8.7974 0.932401 10.4402 1.8748 11.7644C2.06429 12.0304 2.442 12.0793 2.69297 11.8695L7.19939 8.10879L7.20286 8.10691C7.41915 7.92692 7.69787 7.81874 8.0018 7.81874C8.30574 7.81874 8.59171 7.92974 8.80926 8.11381L8.81273 8.11569L13.3084 11.8673C13.5597 12.0771 13.9377 12.0275 14.1272 11.7613C14.9918 10.5456 15.5 9.06143 15.5 7.45907V7.45938Z\" fill=\"#627C84\"\/>\n        <path d=\"M38.5 7.45938C38.5 3.30547 35.0854 -0.0560486 30.8952 0.000708303C26.9853 0.0537023 23.7309 3.14742 23.5121 7.03041C23.4125 8.7974 23.9324 10.4402 24.8748 11.7644C25.0643 12.0304 25.442 12.0793 25.693 11.8695L30.1994 8.10879L30.2029 8.10691C30.4191 7.92692 30.6979 7.81874 31.0018 7.81874C31.3057 7.81874 31.5917 7.92974 31.8093 8.11381L31.8127 8.11569L36.3084 11.8673C36.5597 12.0771 36.9377 12.0275 37.1272 11.7613C37.9918 10.5456 38.5 9.06143 38.5 7.45907V7.45938Z\" fill=\"#627C84\"\/>\n        <path d=\"M61.5 7.45938C61.5 3.30547 58.0854 -0.0560486 53.8952 0.000708303C49.9853 0.0537023 46.7309 3.14742 46.5121 7.03041C46.4125 8.7974 46.9324 10.4402 47.8748 11.7644C48.0643 12.0304 48.442 12.0793 48.693 11.8695L53.1994 8.10879L53.2029 8.10691C53.4191 7.92692 53.6979 7.81874 54.0018 7.81874C54.3057 7.81874 54.5917 7.92974 54.8093 8.11381L54.8127 8.11569L59.3084 11.8673C59.5597 12.0771 59.9377 12.0275 60.1272 11.7613C60.9918 10.5456 61.5 9.06143 61.5 7.45907V7.45938Z\" fill=\"#627C84\"\/>\n    <\/svg>\n<\/div>\n\n\n<div class=\"blog_cta rounded-[24px] tabland:rounded-[32px] my-8 tabland:my-14 py-8 tabland:py-12 px-6 tabland:px-5 text-center\" style=\"background-color: #F4F4F4;\">\n    <h2 class=\"font-ttnormspro slightly-tight-letters-title text-3xl font-extrabold mb-4\" style=\"color: #20272D;\">Stay in the loop.<\/h2>\n    <div class=\"desc font-lexend text-sm text-[#6A6A6C] mb-8 leading-normal font-feature-on tight-letters-paragraph\">Join our newsletter for exclusive updates and insights you won\u2019t want to miss.<\/div>\n            <a href=\"#subscription_form\" class=\"btn w-fit mx-auto\">\n            <div class=\"text\">\n                Subscribe            <\/div>\n        <\/a>\n    <\/div>","protected":false},"excerpt":{"rendered":"<p>Why are people told they can\u2019t afford a mortgage when they spend more on rent?<\/p>\n","protected":false},"author":3,"featured_media":1640,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[103],"tags":[116,95,119,117,118,115],"post_author":[50],"class_list":["post-184","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-knowledge","tag-bank-of-england-stress-test","tag-first-time-buyer-mortgage","tag-housing-crisis","tag-mortgage-affordability","tag-mortgage-news","tag-mortgages-uk","post_author-team-strideup"],"_links":{"self":[{"href":"https:\/\/strideup.co\/wp-json\/wp\/v2\/posts\/184","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/strideup.co\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/strideup.co\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/strideup.co\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/strideup.co\/wp-json\/wp\/v2\/comments?post=184"}],"version-history":[{"count":14,"href":"https:\/\/strideup.co\/wp-json\/wp\/v2\/posts\/184\/revisions"}],"predecessor-version":[{"id":2837,"href":"https:\/\/strideup.co\/wp-json\/wp\/v2\/posts\/184\/revisions\/2837"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/strideup.co\/wp-json\/wp\/v2\/media\/1640"}],"wp:attachment":[{"href":"https:\/\/strideup.co\/wp-json\/wp\/v2\/media?parent=184"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/strideup.co\/wp-json\/wp\/v2\/categories?post=184"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/strideup.co\/wp-json\/wp\/v2\/tags?post=184"},{"taxonomy":"post_author","embeddable":true,"href":"https:\/\/strideup.co\/wp-json\/wp\/v2\/post_author?post=184"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}