Last week we polled brokers on whether they felt the pay rate mortgage, which was launched last month, represented a step change for the industry. Almost half (46%) said that it did represent a step change, with just a quarter disputing the notion.
Chris Lloyd, associate director at Enness Private Clients, said that the product had made a big difference to his clients. He said: “It offers much more lenient rental stress testing, and means that clients can borrow more. A lot of our large portfolio landlords are interested in it as they are being so restricted on how much they can borrow with other lenders.”
Alan Cleary, managing director of Precise Mortgages, said that the pricing on the pay rate mortgage will be changing soon, noting how well received it had been by brokers and emphasising that additional underwriting takes place on all mortgages over 65% LTV.
He said: “The pay rate mortgage only offers a bigger loan size for those customers who have sufficient disposable income to bridge the gap, have equity in other properties to allow them to bring down the LTV if they need to refinance, or if they have cash to do the same thing. It’s squarely pointed at additional rate and higher rate taxpayers, those borrowers who have wealth and can prove it. If they say they have savings or disposable income, we will go and verify it.”
Pushing action from other lenders
Lloyd pointed to Kent Reliance as another lender taking a more flexible approach to stress testing, and noted that the lender’s difficulties with turnaround times was a result of the high demand for this sort of lending.
He continued: “High street lenders are so risk averse they won’t do this, but we are seeing some movement in this space. The stress tests are why the market has slowed, so it is encouraging to see lenders adapting their criteria to keep the market moving.”
Rachel Geddes, business principal at Mortgage Advice Bureau in London, added: “There has been a response to the launch from other lenders. We have seen some lenders speaking to us about changes which will happen over the next quarter. Some have adjusted their stress testing down slightly too. The Precise launch has certainly bucked the market to take some action.”