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TMW will maintain 125% rental cover ratio for existing borrowers

The Mortgage Works (TMW) has announced that its rental cover ratio of 125% will remain unchanged for existing borrowers, whereas BM Solutions reports that it is still considering its options but will confirm any changes to affordability criteria well before 1 January 2017.

In September, the Prudential Regulation Authority (PRA) released its report outlining new underwriting standards for the buy to let sector and set the deadline of 1 January 2017, by which time lenders must implement changes to interest coverage ratio tests and interest rate stress tests.

The regulator’s new standards and deadline are designed to dovetail with the date of 1 April 2017, which is when the Government plans to start reducing the amount of mortgage interest relief that buy to let landlords currently receive.

As a consequence, buy to let mortgage lenders are beginning to confirm changes to their affordability criteria.

A spokeswoman for TMW said: “There will be no impact for existing TMW borrowers as a result of the changes to the rental cover ratio, for those who are seeking a product switch or transfer of equity, providing no additional borrowing is involved.”

If a customer is new to TMW and seeking a remortgage from another buy-to-let lender, the current rental cover ratio of 145% will be applied. This is to ensure that all landlords can maintain a positive cash flow, particularly as the tax changes relating to buy to let start to take effect.”

BM Solutions meanwhile, is still reviewing its options and is expected to make an announcement by the end of the year.

A spokeswoman for BM Solutions said: “We will be in a position to announce our intended plans well ahead of the January PRA deadline for implementation.”

We are currently considering a number of options and have invested time and resource to address the change in tax regime while helping provide the right level of protection for borrowers. Our customers who have come to the end of their fixed term and maintained existing payment arrangements will be eligible for a new product rate maintaining their current terms and conditions,” she added.

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