The UK’s biggest mutual will apply a stress rate of 5.50%, or pay rate plus 2% if higher, on all applications for new lending.
The two exceptions will be if a product term is fixed for five years or more, or on a remortgage of up to 65% Loan to Value (LTV) or less without looking to raise further capital. In these cases, the current rate of 4.99% will apply.
Customers applying for a product switch or transfer of equity, providing no additional borrowing is involved, will also avoid the 5.5% stress test.
Paul Wootton, managing director of TMW, said: “[The mutual] is making these changes to comply with the requirements set out by the Prudential Regulatory Authority (PRA) in its recent Supervisory Statement, to be implemented by 1 January 2017.
These changes follow TMW’s increase in Interest Cover Ratio to 145% in May 2016, a pro-active move that recognised the need to help landlords to maintain a positive cash flow over the coming years, ahead of the forthcoming changes to interest tax relief.”
For buy-to-let mortgage applicants with over £1m of overall buy to let borrowing with the Nationwide Group, a stress rate of 5.99% will continue to apply.
At present, mortgage interest is fully tax deductible, but from April 2020 tax relief on mortgage interest will be limited to 20%. This means that higher tax rate payers will pay more tax as relief is reduced to the equivalent level of a basic rate tax payer.
The Mortgage Works (TMW), Nationwide Building Society’s broker-only buy-to-let arm, is preparing to offer a direct to consumer channel in a move away from its traditional intermediary-only focus.
The mortgage provider has launched a pilot scheme tailored to customers who approach Nationwide branches or contact them via the telephone to enquire about buy-to-let mortgages.
It is believed the pilot is part of a bigger stand-alone D2C product launch for buy-to-let clients in 2017.