Stress testing on fixed rates?!?!

Lifes_Grand_Plan

Hi folks,

Not really up on the new mortgage rules and stress testing... seems like a sensible idea to check people can still afford their mortgages if the rates go up....

My question though is, do they still stress test the same if you are opting for a fixed rate? Obviously if interest rates generally go up but you are on a fixed rate then you stay the same, so can't see why they would, certainty not to the extent of if you applied for a variable rate mortgage.

TIA for any advice.

ACG

I think (I sa think as im not 100%) but if you choose a 5 year fixed or longer then the lender CAN choose to stress test ont he rate applicable rather than the 7-9% they would do otherwise.

I can only think of 1 high street lender that in the back of my mind I think does that.

Hows that for giving myself plenty of "think" get out clauses.

Thrugelmir

Mortgages last for far longer than 5 years. Possibly another 30 years. Lenders are given regulatory guidance as to what interest rates should be used. So it's not as if they are picking these rates out of thin air. Repaying the capital off a mortgage is a long slow process.

betmunch

My understanding is that if the fix is 5 years or longer then no stress test is required.

In practice I believe all lenders will still do the stress test for the very reason Thrugelmir says above.

If they didnt you would be able to borrow more on a long term fix than you can on a short term fix

amnblog

As stated above, the need to stress test is a regulatory one. It does not apply to fixed rates of five years or longer.

Anyone tight on affordability should be using a broker.