The mortgage affordability test which is used by lenders to check if buyers can cope with a sudden increase in payments has been ditched by the Bank of England.
For the past eight years, borrowers had to show that they could continue to repay their loan if the borrowing rate increased.
Under the Bank of England rules, lenders would look at what would happen if interest rates went up by 3%.
The affordability test has now been scrapped, which may help some borrowers secure a loan, such as the self-employed or freelance workers.
The withdrawal of the affordability test was announced in June but has come into effect this Monday.
While being able to borrow more may help people get on to the property ladder, there are fears that it could encourage buyers to take on too much debt.
“Affordability has been a perpetual issue for wannabe homeowners for many years,” Myron Jobson, senior personal finance analyst at Interactive Investor, said.
“Loosening the mortgage underwriting standards might ease their plight, lenders’ approach to affordability will continue to vary.
“Unwinding these measures amid the cost-of-living crisis run the risk of people biting off more than they chew financially to purchase a property.
“This could be a particular issue among first-time buyers - many of whom have seen their desperate efforts to buy thwarted by runaway house prices and the cost-of-living squeeze on deposit building.”
Most high street banks will use 4 to 4.5 times the borrower’s salary as the measure to decide how much they are willing to loan.
Households are being stretched by soaring energy prices, and inflation in the round is predicted to hit 11% by the end of the year.
“With interest rates starting to creep up to meet the damaging impact of inflation and soaring energy and food prices, you would think that people’s ability to afford their mortgage should really be under the spotlight now," Gemma Harle, managing director at Quilter Financial Planning, said.
"First-time buyers also need very sizable deposits and in the current fiscal environment saving this type of money will be very difficult due to increasing rents and the cost of living.
"On top of this, inflation will be eating away at any other savings they have sitting in cash.”
Latest mortgage lending figures from the Bank of England show that in June 63,726 mortgages were approved.
This is down 3% compared to May 2022 and down by 21% compared to June 2021.
UK house prices reached a record high of £283,000, a 12.8% jump in just a year.
Watch: Will UK house prices ever fall?