Last week we saw another mainstream lender, Santander, announce that it is moving its rental coverage requirements upwards in response to forthcoming affordability assessment changes required by the Prudential Regulation Authority.
From 23 November the interest cover ratio will increase from 125% to 145% stressed at a single affordability rate of 5.5%. Previously, the bank used a tiered system based on loan to value. This means that that customers wishing to use the existing calculation must get their broker to submit the application by 22 November at the latest.
On a more encouraging note, BM Solutions (part of Lloyds Banking Group) is looking to introduce a more tailored approach to its affordability borrowing criteria based on the applicant’s individual level of income tax.
From Monday 21 November all applications will be assessed to make sure that any additional tax liability the landlord may have is included in the rental income.
This means that it will be able to maintain the current 125% rental cover ratio for basic rate tax payers. For personal borrowers in higher tax brackets, BM Solutions will calculate the rental income requirement based on the applicant's individual circumstances.
BM Solutions is also:
• Changing from a tiered stress rate structure to a one-size fits all notional stress rate of 5.5%
• Upping the maximum borrower age at the end of the mortgage term to 80 years
As usual, I’ll keep you posted on developments and in the meantime, if you would like to chat through how lenders are changing their affordability assessments, do get in touch and I will look at how the changes might affect you personally.
Paul Martins has left Mortgages for Business for pastures new. For more information or for any questions relating to this blog, please contact the BTL Team on 0345 345 6788, where one of our consultant mortgage brokers will be happy to assist.
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17th November 2016