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Buy to Let Update.

28 December 2016

As you will be aware, from 1 January 2017, The Prudential Regulation Authority (PRA) will require the changes to interest coverage ratio tests and interest rate stress tests to be in place. Lenders have been busy implementing these changes and all the details have been updated on our Buy to Let Matrix which can be found here.

Here are a few more of the changes received this week:

 

The Melton

The Melton currently offers 4 BTL products - Business BTL, Consumer BTL, Family BTL and Holiday BTL. These products will remain unchanged, however changes to their criteria are as below:

  • Minimum income required increased from £25k to £35k. This can still be shared between joint applicants
  • Max portfolio of 3 properties in total in mortgage to the society or other lenders. This has decreased from 4
  • Rental calculation increased to 145% of the society's BTL stressed rate 5.5% on an interest only basis. This only differs on the Holiday BTL product where the calculation is 130% of 5.5%
  • They will no longer offer BTL loans on any leasehold properties
  • They will not allow debt consolidation on non-regulated mortgages

 

MBS Lending

MBS have also made a few changes to their criteria in which also comes in to effect on 1st January 2017, please as below:

  • Income multiples have increased to 3.5 x sole and 3.5 x joint
  • They now allow 100% of guaranteed overtime and bonus payments and 50% of regular overtime, bonus and commission payments
  • A minimum of 3 years accounts for self employed accounts required

 

Aldermore

The way Aldermore calculate affordability on BTL cases is changing; from 23 December 2016 all cases submitted will be subject to their new underwriting standards and affordability rules.

Key changes are detailed below

1)      Their new Interest Coverage Ratios (ICRs) with effect from 23 December are:

Single Investment Property Including Multi-Unit Freehold
                                   

Minimum ICR (including  surplus personal income)

minimum icr (excluding surplus personal income)

Private Individual 145%  120% 
Limited Company 125% 110%

 

House in Multiple Occupation (HMO)
                            Minimum ICR (including surplus personal income)Minimum ICR (excluding surplus personal income)
 Private Individual 185%   160%
 Limited Company 155%  140%

 

Notes:

Loans on capital repayment will need to meet the ICR based on the interest only cost.  The rental income alone must be sufficient to cover at least 100% of the stressed mortgage payment.

If the required ICR is not achieved, personal surplus disposable income can be used to meet the shortfall, subject to the minimum ICR shown in the table above.

2)      All applications will be stress tested against the following interest rates with effect from 23 December: 

All applications
Product typeStressed interest rate
 Term Variable rate   Higher of 1) pay rate + 2%, or 2) 5.5%
 Fixed rate <5 years
 Fixed rate 5+ years  Higher of 1) pay rate, or 2) 5.5%

 

Key dates

DIPs Submitted: 

  • All buy-to-let DIPs submitted up to 11:59pm on 22 December 2016 will be underwritten using their existing affordability rules and their standard 14 day DIP expiry rules. 
  • After this time, (from 23 December 2016), all DIPs submitted will be subject to their new lending criteria and affordability rules.

Apps Submitted:  

  • All applications from DIPs submitted up to and including 11:59pm on 22 December 2016 must be progressed to Offer by 31 January 2017, otherwise they will need to be re-submitted and will be subject to new underwriting standards and affordability rules.

Important information: 

Please note there will be no offer extensions on cases underwritten against our existing underwriting standards and affordability rules (pre 23 December 2016), therefore all offers must complete by 30 April 2017, otherwise they will need to be re-submitted and will be subject to their new underwriting standards and affordability rules. The only exception to this is for New Build cases which must complete by 30 June 2017. 

 

Buckinghamshire Building Society

With immediate effect the society will assess BTL affordability on a minimum rental cover of 145% of pay rate or lesser of 5.5%. It will be possible to use excess disposable income to justify a shortfall in rental. Affordability of existing commitments to be confirmed via gross income multiplier of 4 times existing annual expenditure on mortgages, loans, maintenance and school fees.


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