Easier bank lending v mortgage test rates

Tony Alexander’s latest survey of mortgage advisers shows the easing in lending criteria may reflect banks pulling back from trying to attract business through discounted interest rates. Several advisers mentioned banks taking margin and not discounting.

Further feedback from advisers shows credit conditions cannot be considered to be easy – just slightly less tight. As the retail interest rates charged by banks have risen, so too have the test rates they use to check buyers can afford the loans.

Many borrowers cannot meet debt servicing requirements with test interest rates between 8.75% and 9.5% and assessment of expenses and spare income requirements remaining relatively tight – though easing bit by bit each month.

There is no other purchase where people are only given the go-ahead to buy, if they can afford to pay more than the asking price.