This change to mortgage rules could drive up house prices

Easing the stress testing rules around getting a mortgage could cause both house prices and first-time buyer numbers to rise, new research has found.

After a change in guidance in March, lenders are no longer required to stress test borrowers at the standard variable rate, plus 1%, as long as borrowers take on a fix of less than five years.

"Stress tests" are when the lender checks to see if a borrower could still cope if their interest rate increases.

We have already seen several major lenders, including NatWest, Lloyds and Santander, relax their borrowing rules after government pressure to boost the housing market. 

Savills says the change in rules could mean transactions among first-time buyers increase as much as 24%, according to This Is Money.

But it's a double-edged sword, as it could also increase house prices as much as 7.5% over the next five years.

Lucian Cook, head of residential research at Savills, said: "The more increased borrowing capacity impacts prices, the less impact there will be on transactions."

How much prices increase will also depend on how much new housing stock is delivered.

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