Lending will not be affected by rental calculation increases

Lending will not be affected by rental calculation increases

New research from Buy to Let Club has shown an increase in rent cover can be absorbed.

125% @ 5% has been the norm for many years however there is a clear shift in direction for many lenders.  TSB and Paragon are the latest lenders to join Buy to Let powerhouses TMW, BM Solutions and Godiva to calculate rent cover at 125% @ 5.5% for 65% LTVs and over.   Given the focus on stress testing, and some of the tax changes to be implemented by the government over the next few years there is logic behind these decisions.


Buy to Let Club has conducted some in depth analysis on applications from the last quarter of 2015 (Oct –Dec ) and have identified that the average rent cover based on the rentals provided for applications is 163% @ 5.5%.  Therefore even at 125% @ 5.5% there is sufficient breathing space, and should not impact the borrowing levels of the majority of cases.

Ying Tan, managing director of Buy to Let Club, says: “This analysis shows, that LTVs are sensible and rents are high enough to sustain the extra rent stress testing lenders are implementing.  The analysis is nationwide, however the rent coverage is tighter in the south.  The only mainstream lender that still operates at 125% @ 5% is Santander.   With their slick processing they are gaining business, particularly in London and the South East where yields are lower.  We currently have a market leading two year fix exclusive with a flat fee which has been attracting a lot of broker interest in these areas.”

Join our mailing list:

Leave a comment



Our Next Event

Specialist Lending Roadshow June 2017

Specialist Lending Roadshow June 2017

Crewe - 20/06/2017

Northampton - 21/06/2017

Chingford - 22/06/2017

Brighton - 23/06/2017

Register now

Latest Comments

Oliver Conway
Oliver Conway 18 May 2017

Making a neat inventory is a good idea, but if the seller is not willing to provide it, can the buyer demand it?

view article
Bertrand
Bertrand 17 May 2017

First step to nationalisation of the private rented sector IMHO. Nanny state poking their noses into things yet again. I object, as a decent landlord, sometimes having to deal with some pretty awful tenants,...

view article
Izzy
Izzy 16 May 2017

This is such a great a post. I love the detail you've gone into. It's a very useful article for helping those who are looking at deciding which sector they would like to go into! When I first started investing...

view article
paul burnham
paul burnham 30 Apr 2017

Jeremy Corbyn's pledge that a Labour government would build 500,000 new council houses must electrify the general election campaign. Reliance on markets and the profit motive has brought huge housing-related...

view article
CommercialTrust
CommercialTrust 28 Apr 2017

Sadiq Khan?s announcement of an online database of landlords and letting agents who have been convicted of housing offences, appears on face value to be a variation of the already implemented Database

view article
warren
warren 26 Apr 2017

You're very welcome Mary! Glad you enjoyed them :)

view article
Mary Ward
Mary Ward 26 Apr 2017

Thank you for the wonderful ideas. First impressions can make or break a deal. It's sadly that many homeowners drop the kerb to create an off-street parking space.

view article
Tony Gimple
Tony Gimple 14 Apr 2017

I'm not at all surprised that so many landlords are still confused about what the tax changes really mean and how it will affect them. In particular, the blind rush to incorporation is leaving landlords...

view article
MH
MH 13 Apr 2017

You are right that the bank holidays are going to be spoiled in looking for the properties. But people who want to sell their property and looking for the better relocation, they can get benefits of this...

view article
bnellyb
bnellyb 08 Apr 2017

There will be an exodus of private landlords over the next 5 years as tax changes take effect, private landlords provide an important service to the rental market, why do housing associations and councils...

view article
Fred Cassman
Fred Cassman 07 Apr 2017

"Make it look like you are at home": often people forget this and share on facebook their location!

view article
jared townsend
jared townsend 05 Apr 2017

It'll be interesting to see how & if the Government's asset sale regarding mortgages helps

view article

Related stories

More articles from Landlords

Specialist Lending Roadshow June 2017

20th-23rd June

4 days
7 specialists
4 locations
Free to attend

Click here to register now