04 January 2017
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 amount earned in rental income must cover at least 140% of the interest only mortgage payment, calculated in accordance with the following:
For products that are not fixed for 5 years or more, a floor of 5.5% will be applied.
Where the rental cover calculations are not met, the Society will consider lending where it can be adequately demonstrated that the strength of borrowers’ covenant is sufficient to create an acceptable lending risk. In order to evidence this, a budget planner will need to be provided with every case.
To make the process simpler, The Dudley Building Society will be launching a BTL Calculator. This will help you identify if your application meets the required rental coverage.
They will honour any cases in their current Decision in Principle and application pipeline and assess these cases using the current criteria, but any case that has successfully been accepted at DIP stage, should be submitted within 2 weeks of acceptance, no later than the 13th January 2017
Any significant change in the proposition would have to meet the new criteria assessment.
To comply with the new regulations with effect from the 1st January 2017, They will be introducing some changes to the way they assess BTL applications. These can be summarised as follows:
There are no changes to their BTL lending criteria.
BTL fully packaged mortgage applications which have been assessed by underwriters by close of business on the 31st December 2016 will be considered on the current affordability assessment requirements.