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Axis Bank takes flexible approach to BTL stress calculation

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  • 20/12/2016
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Axis Bank takes flexible approach to BTL stress calculation
Axis Bank is the latest lender to increase its interest coverage ratio (ICR) for buy-to-let borrowers while adopting a flexible approach for remortgage borrowers and limited company applicants.

From 1 January, Axis will raise its calculation metrics for individuals choosing a product term of less than five years to 145% of the pay rate plus 2%, with a floor of 5.5%. Limited company applications will be assessed on 125% of pay rate plus 2%, with a floor of 5.5%.

Landlords opting for a fixed mortgage product of five years or more will be subject to an ICR of 145% of the pay rate, or 125% for limited companies. Remortgages for personal and limited company applicants which do not include capital raising must pass a stress test of 125% @ 5%, applicable to the property to be financed. The customer’s portfolio must meet the new stress of 145% @ 5.5% for personal applicants and 125% @ 5.5% for limited company applications.

Applications from basic rate taxpayers may be assessed at 125% @ 5.5%.

A flexible approach

The specialist lender has incorporated a number of flexibilities into its buy-to-let underwriting assessment.

A background income assessment may be carried out to support any ICR shortfall but this will not be used for applications which have less than 100% rental coverage. The use of background income is subject to prior agreement with Axis and will only apply where the loan size is a minimum of £350k.

Lending below the 100% rental coverage floor will be considered on an individual case basis where the borrower meets the regulatory high net worth definition of an annual income of £300,000 a year. And a net worth of £3m excluding their buy-to-let portfolio.

Andrew Ferguson, head of buy to let, said: “We are pleased to offer our broker partners a range of solutions to meet the needs of their landlord clients. Our personalised assessment of each case enables us to understand the needs and challenges faced by landlords, ensuring we lend responsibly at a time of increased cost pressures for the private rental sector.”

Doug Hall, director 3mc, said: “Axis has built a strong reputation as a sensible and pragmatic lender which understands the specialist buy-to-let market. These changes demonstrate that and give brokers a range of options to fit the individual circumstances of landlord clients.”

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