We are now just weeks away from 1 April, the date on which Stamp Duty hikes for buy-to-let properties and second homes come into effect. With investors that are in the process of buying property rushing to do so before the deadline, lenders are seeing a surge in business. It’s not surprising therefore that we haven’t seen too much in the way of criteria changes this month as all efforts are no doubt focused on dealing with the influx of applications.
Of course, the lending sector is also getting to grips with Mortgage Credit Directive which comes into play on 21 March. The EU legislation affects the way in which lenders deal with affordability and reporting, among other things, and as such systems must be updated and staff trained.
As a result unregulated products like buy to let seem to be taking a back seat for a few weeks.
We have seen some criteria changes, however, from OneSavings Bank through its Kent Reliance and Interbay Commercial brands.
Kent Reliance recently announced its minimum rental income requirement and maximum loan amount will now depend on the experience of the landlord and the type of transaction and Interbay Commercial will be adopting the same changes shortly.
Where the property is a single dwelling or HMO with fewer than four rooms, a 100% rental cover will apply for landlords who own three or more buy-to-let properties (where the blended portfolio rental income exceeds 125% based at a 5% notional interest rate). This is available up to 75% LTV. Where blended portfolio rental income is not being used, a 125% rental cover will be applied. If the landlord owns fewer than three buy-to-let properties a 130% rental cover will apply.
For HMO properties with four or more letting rooms, a 140% rental cover can be considered for landlords who own three or more buy-to-let properties where the blended portfolio rental income exceeds 150% cover based on a 5% notional interest rate. Again, this is available up to 75% LTV.
A 150% rental cover will be applied when blended portfolio income is not being used and a 160% rental cover will be applied where the landlord owns fewer than three buy-to-let properties
The changes came into effect for Kent Reliance on February 8 and Interbay followed suit on 2 March.
