CeMAP MRT1 The Property Market, Interest Rates & the Lending Sector question: Financial Policy Committee's affordability test

CeMAP MRT1The Property Market, Interest Rates & the Lending Sector

A trainee adviser tells a client in 2026 that every lender must stress-test applicants at their reversion rate plus 3% under the Financial Policy Committee's affordability test. What is the correct position?

A The trainee is right: the FPC's 3% affordability test still applies to every residential mortgage
B There is no stress test now, because the FPC test and the FCA's stress rule both ended in 2022
C The FPC test was withdrawn from 1 August 2022, but lenders must still stress-test affordability under MCOB 11.6.18R
D The FPC test was replaced in 2022 by a fixed 7% stress rate that the PRA sets for all lenders

Show the answer and explanation

Answer: C. The FPC test was withdrawn from 1 August 2022, but lenders must still stress-test affordability under MCOB 11.6.18R

The FPC withdrew its affordability test recommendation with effect from 1 August 2022 (Bank of England), keeping the LTI flow limit. The FCA's own rule still applies: under MCOB 11.6.18R a lender must consider likely rates over at least five years (unless the rate is fixed for five years or more), have regard to market expectations, and assume a rise of at least 1%.

Common mistake

Quoting the withdrawn FPC 3% stress test as current.

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