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.”

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Latest Comments

SecomTech
SecomTech 22 Jun 2017

AT Last...This was discussed years ago and there was a move towards landlords registering their bad tenants on a database..(can't remember where) It seems a logical step though our leaders will probably...

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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?

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Bertrand
Bertrand 17 May 2017

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Izzy
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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...

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warren
warren 26 Apr 2017

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

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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.

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