What the papers said about stress testing and maturing mortgages

The Financial Times reported this weekend on claims that industry experts are urging the Financial Conduct Authority (FCA) to reduce the stress test interest rate applied to borrowers when assessing affordability. Rules brought in by the regulator in 2014 require lenders to check whether borrowers could afford their mortgage payments if interest rates were 3% above current levels, but many are calling the stress rate unrealistic. The FCA maintains however that, in the long term, the 3% rate is ‘proportionate’. The Guardian took a look this weekend at interest-only mortgages, following recent data suggesting that 2017-18 is the first of 3 ‘peak periods’ when many of these mortgages will mature. Alternative options for those unable to repay their mortgage in full are limited, and especially so for older borrowers. As experts pointed out however, having that conversation with the existing lender could be helpful, as some will allow an extension to the mortgage term, or a greater degree of flexibility when it comes to remaining on an interest-only basis. Elsewhere, the Sun on Sunday highlighted the growing number of competitive 10-year fixed rate deals available on the market now. With base rate at an all time low, locking in to a deal now and protecting future mortgage payments is an attractive prospect. Borrowers must be aware of potential Early Repayment Charges however, and weigh up the importance of flexibility within their mortgage before committing.