Posted on: Tuesday, September 27, 2016
When the Bank of England decided to cut interest rates in August, the main aim was to make the cost of borrowing cheaper. A less-reported side effect is that it also helps consumers borrow slightly more.
A while ago the Prudential Regulatory Authority brought in rules to ensure that lending wasn’t purely based on the record low interest rates we’re currently enjoying. If it were, many people could find themselves in serious difficulties when interest rates eventually rise.
When assessing affordability, lenders are required to check that the loan would still be affordable if rates increased by 3%. This is what they call the “stress rate” and will typically be 3% above the lender’s Standard Variable Rate - even if the actual deal you’re applying for is much, much lower.
Of course when the rule came in no-one expected Base Rate would in fact fall further. But that’s what’s happened and so you could borrow slightly more today, than you could in July. That’s not just theory – a number of lenders have announced reductions to their stress rates, including big names like Barclays and Nationwide.
In real terms a 0.25% reduction to the stress rate isn’t going to make a huge difference to the amount you can borrow but anything that helps buy your dream home is good news.
We are required by law to conduct anti-money laundering checks on all those selling or buying a property. Whilst we retain responsibility for ensuring checks and any ongoing monitoring are carried out correctly, the initial checks are carried out on our behalf by Lifetime Legal who will contact you once you have agreed to instruct us in your sale or had an offer accepted on a property you wish to buy. The cost of these checks is £60 (incl. VAT), which covers the cost of obtaining relevant data and any manual checks and monitoring which might be required. This fee will need to be paid by you in advance of us publishing your property (in the case of a vendor) or issuing a memorandum of sale (in the case of a buyer), directly to Lifetime Legal, and is non-refundable. We will receive some of the fee taken by Lifetime Legal to compensate for its role in the provision of these checks.