FHL to increase buy to let stress test for individuals

In response to regulatory demands for more rigorous affordability and stress-testing around buy to let lending, Foundation Home Loans (FHL) is planning to change the basis of its rental calculation for individual applications from 125% to 145%, as from 14th June 2016.

Its ratio for limited company customers will remain at 125%, further bolstering the attractiveness of FHL’s buy to let proposition for limited companies.

Simon Bayley, commercial director, FHL said:

“There is no doubt that with the new restrictions on tax relief which landlords can claim back and now the hardening of the rental cover calculation, the limited company option is really gaining ground for a greater percentage of landlords, particularly those who are coming to BTL at this point.

“We have been delighted by the response to our Limited Company offering, which is priced at the same rate as our individual BTL products. Intermediaries and their landlord clients are recognising the efficacy of a limited company option and as long as there is a recognition of the pros and cons, the scales are coming down more heavily in favour of this approach.

“As a responsible lender, we have heeded the regulator’s calls on affordability and stress testing and are planning to change the basis of our rental calculation for individual applications from 125% to 145%, although it will not be implemented until mid-June when we make other LIBOR based changes. Limited Company BTL products remain unchanged.

“Foundation Home Loans supports the regulator’s intervention to enhance the way that individual landlords are protected by a more rigourous affordability system, but also recognise that experienced landlords are more than capable of assessing risks surrounding exposure to repayment of a loan in the event of rental shortfall.”