At the end of this month, the Bank of England will ditch the affordability test that banks have been obliged to run on prospective mortgage customers, a move in tune with the Conservative government’s keenness to do away with “unnecessary” regulation.
Unwarranted red tape can, of course, get in the way of efficient markets and access to funding. But it is hard to imagine a more bizarre time to kill off the BoE’s affordability test, which for the past eight years has ensured that home buyers could cope with a 3 percentage point rise in interest rates.
Households are being stretched by rampant energy prices, and inflation in the round is predicted to hit 11 per cent by the end of the year. Recession is all but inevitable, with unemployment levels — a key determinant of mortgage default rates — set to jump from 3.8 per cent now to 5.5 per cent within three years.