How do interest rate and lending rule changes affect Watford?

The Bank of England hiked the base interest rate from 1.25% to 1.75% - the biggest single rise since 1995 - as it tried to control runaway inflation.

At the same time, the mortgage affordability “stress test” has been scrapped.

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Lenders will no longer be forced to calculate whether potential borrowers could afford interest rates climbing by 3%.

Watford branch manager at Coopers Estate Agents Alex McMorrin offered advice for buyers.

He said: “I feel first-time buyers should be particularly cautious about biting off more than they can chew. Interest rates will rise further over the next few years.

"The property market has been very strong over the past six months in Watford.

Coopers Estate Agents, Watford (Image: Google Street View)

“We have not been able to get the stock quick enough for the demand we have been receiving. This has resulted in buyers offering their absolute maximum to secure the property they liked.

“Just because the Bank of England has removed this calculation does not mean you can’t factor it in for yourself; be cautious, getting on the property market is sensible, as long as its within your means.”

The “stress test” was introduced to prevent a repeat of the 2008 financial crisis.

Mr McMorrin added: “People were being sold loans they would not be able to afford if interest rates rose, a striking similarity to our current situation.

Picture: PA “This could leave buyers in a difficult financial position with the cost of living increasing.

“In the short term I don’t think it’s going to change much, but over the coming years we do not want to see a repeat of the past.”

The estate agent highlighted that 'loan to income' calculations, which assess borrowers based on a multiple of earnings, will still restrict buyers, so it won’t be a free-for-all.

He also predicted that rising interest rates will have a much greater effect on buyers’ options, prompting more landlords to sell off properties as profits are squeezed.

Although the test is no longer mandatory, some lenders may keep it in place for their own security.

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