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TMW to apply 5.5% BTL stress rate

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  • 05/12/2016
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TMW to apply 5.5% BTL stress rate
The Mortgage Works (TMW), the specialist buy to let arm of Nationwide Building Society, is set to change its rental stress rates for all new investor mortgage applications on 19 December.

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.

The Mortgage Works pilots direct to consumer buy to let

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