The lender currently stresses applicants’ income at a rate of 5.74%, its buy-to-let variable rate plus 1%, but will lower this to 5.5%, the minimum stress rate stipulated by the regulator, on Monday 5 December.
It will increase its income coverage ratio from 125% to 145%. The stress rate for five-year fixed-rate mortgages will be the higher of the product rate or the buy-to-let variable rate, which is currently 4.74%.
Further changes will be brought in from next week, in relation to portfolio size. The bank will no longer lend to applicants with more than 11 mortgage properties in their portfolio.
The maximum portfolio limit of £2m and/or four properties with Virgin Money will remain unchanged.
A spokesman for Virgin Money said: “The changes we have made to our maximum mortgaged buy-to-let properties are in line with our target market of customers with smaller buy-to-let portfolios and we expect this to have minimal impact on the number of customers we will accept following the changes.
“We have updated our buy-to-let underwriting policy to comply with the standards outlined by the PRA and the changes will ensure that all buy-to-let lending continues to be done in a prudent manner.”
The new policy will apply to any buy-to-let decision-in-principle submitted on or after Monday 5 December.
With one month left before the PRA’s ICR changes come into force, changes to criteria are being seen across the market. Coventry Building Society will up its ICR to 5.5% of 140%, from 15 December. Five-year fixed rates are not impacted by change and will continue to be stressed at 5%.
The PRA’s requirement that landlords with four or more buy-to-let properties, be subjected to specialist underwriting, will come into force on 30 September 2017.
