As of 19 December 2016 The Mortgage Works (TMW) will increase the lending “Interest Coverage Radio” and “Interest Rate Stress” following guidance form the The Prudential Regulation Authority (PRA) that regulates banks.
You can secure current products by ensuring Bespoke Finance submit a Full Mortgage Application (FMA) on or before Friday 16 December 2016.
The banks Interest Coverage ratio is now 145%.
The banks Interest Rate Stress is now 5.50%, for all less than five year fixed products.
The banks Interest Rate Stress is now 4.99%, for all five year fixed products AND remortgages under 60% LTV.
The banks Interest Rate Stress is now 5.99%, for portfolio landlords with lending about £1 with the Nationwide Group.
( A stress rate of the pay rate plus 2% may apply if higher than the stress rates noted above. )
The PRA set a legal minimum of 125% at 5.5% – TMW has made the decision to stress BTL mortgages higher than this.
Presumably due to the PRA also requiring the removal of mortgage interest relief being removed from the Taxation of landlords.
How it compares so far?
TMW and Virgin Money have so far announced the same 5.50% stress test for all less than five year fixed products.
Though TMW has a tighter interest rate coverage ratio than Virgin for mortgages fixed for more than five years.
The difference on a property achieving £500 per month is as much as £4,374 additional lend, with higher rental properties of £1,000 per month Virgin Money will lend an additional £13,000.
TMW and Virgin Money is not the first to change its Buy to Let Stress test early (legal requirement 1 January 2017) and other lenders will shortly follow.
We expect to see other lenders using the Five Year Fixed Rate Exception as Virgin Money has.
Although perhaps more competitive as Virgin’s Five Year still meets the PRA minimum – Landlords will have to wait and see.
These changes highlight the importance of discussing your requirements with a mortgage broker the difference in lending may be quite a difference.
So.. how much can I borrow based on my rent?
If you are interested in a The Mortgage Works Virgin Money Buy to Let Mortgage or need to mortgage before other lenders increase there Buy to Let Affordability Stress test then call Bespoke Finance on 08009202001 or email firstname.lastname@example.org