Investigation: future of mortgages  

High interest rates push mortgage stress tests above 10 per cent

  • Describe lenders' liquidity issues
  • Explain Nationwide's lending policy
  • Identify the purpose of SVR
CPD
Approx.30min

Merritt adds: “You'll look at peer SVRs as well. So what’s your relative position of your SVR to others? We have to consider things like conduct risk, and are we comfortable where it’s sat from a fair value perspective?

Optionality for the customer is also priced into an SVR, he explains.

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He concludes: “A customer can go on to it, they can leave at any time. There's no penalty, they can overpay, they can redeem. If you think about how mortgages are structured, we still have to fund anybody on an SVR, but that money can walk out the door at any time.”

Chloe Cheung is a senior features writer at FT Adviser

CPD
Approx.30min

Please answer the six multiple choice questions below in order to bank your CPD. Multiple attempts are available until all questions are correctly answered.

  1. Lenders are required by the FCA’s rules to assume rates will rise by at least how much during the first five years?

  2. What was the Bank of England's affordability test, which it withdrew two years ago?

  3. What happens to Nationwide first-time buyers if they lock in to a five-year or 10-year fixed rate mortgage?

  4. Yorkshire Building Society does the same stress test for two and five-year fixed-rate deals, true or false?

  5. What does Yorkshire Building Society use the SVR for?

  6. According to the FCA, how many people are on a lender's SVR?

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You should now know…

  • Describe lenders' liquidity issues
  • Explain Nationwide's lending policy
  • Identify the purpose of SVR

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