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What is the stress test?
The stress test is a test that was brought in by the Bank of England in 2014. It checks to see that if interest rates rise to 3% you will still be able to pay off your mortgage. The test was brought in to try and avoid a situation like the financial crash in 2007 occurring. This was caused because banks were giving out loans to people who couldn’t afford to pay it back. When the housing market bubble burst the banks realised they couldn’t get any money which led to a crash.
What is happening to the stress test?
The Bank of England has decided that this month it will get rid of the stress test. This means that for some borrowers it maybe easier to get a mortgage. Some of those this will have the biggest positive impact on will be freelance workers and those who are self-employed. The reason for this is if you are self employed sometimes it is difficult to say what your income will be. Due to external events your annual income can fluctuate meaning it would have been harder to past the test. However, with this now gone it makes it easier for those who are self-employed.
Is this reckless?
Now you may think that ridding this test is reckless, but it isn’t. Whilst this test is gone there are still many others that will remain in place. There is still the loan to income framework which still contains various red tape and regulation. Plus, lenders will still be able to use various types of testing when approving loans. These companies will be able to use their own tests that are best suited to them and makes sure that they are giving out affordable loans.
Due to these tests, it is still important that you are trustworthy and sensible with money. You still have to prove you are financially stable to the lenders and that you can pay back your loans. This is where Creddible steps in. We can help you on this journey to getting your mortgage loan approved with easy step by step guides.
Credibble offers two fabulous solutions
If you’re preparing to take a mortgage, never apply until you’ve tried our unique and FREE Credibble Home app. Our smart technology will tell you what you need to fix so you avoid rejection. The app predicts when you will be able to buy, for how much and tracks your month-by-month progress to mortgage success. We’ve even added your own mortgage broker, so you get the best deals available.
More focused on your credit rating? Well, get started for free with Credibble’s 24- Factor Credit Check to truly help you improve your creditworthiness and how lenders view you. (Remember: lenders don’t use your credit score! We’ll show you what lenders look for and how to get your credit report in the best shape possible).