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Mansfield BS drops rental income calculation for landlords

by: Samantha Partington
  • 04/08/2014
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The Mansfield Building Society has reduced its rental income calculation so rent must now cover a standard interest rate of 5% by 130%.

Previously the rental income calculation was based on the Mansfield’s standard variable rate of 5.59%.

Andy Young, chief executive of buy-to-let mortgage club TBMC, said that while a reduction in the calculation was good news for landlords it still remained higher than the industry average of 125% of 5%.

Young said a number of lenders were positioning themselves to grab moremarket share by lowering rates and altering fee structures.

“The buy-to-let market is really heating up particularly in the 75% loan-to-value (LTV) end of the market. The back half of 2014 is going to be competitive as a lot of lenders sharpen their pencils on rate. It is going to be a very interesting end to the year.”

The Mansfield has launched a two-year discounted product at 2.99% up to 70% LTV with a free valuation option for remortgage customers.

July saw a raft of buy-to-let lenders slash rates as a price war took hold of the sector in the third quarter.

Skipton withdrew its tracker products because of a lack of demand while offering a three-year fixed rate at 75% LTV at 2.89% and a five-year fix up to 90% LTV at 4.99%.

Accord attracted attention to its range by offering a 10-day sale, which ended on 24 July, by cutting rates on 20 products starting from 2.89%.

Meanwhile Leeds Building Society focussed on the 60% and 70% LTV product brackets launching fixed rate products at 2.65% and 3.19% respectively.

The Mansfield is the first lender to drop its rental income calculation this quarter, bucking the trend in tightening criteria adopted by other lenders in the market.

In May, Barclays increased its calculation from 125% of the payrate to 5.79% which it said was a reflection of its responsible lending policy.

In his blog for Mortgage Solutions, Ying Tan described the move as a ‘real blow’ for the lower yielding London market. Tan said the only lenders which still offered a rental calculation based on the pay rate of the mortgage deal were Clydesdale and Hinckley and Rugby.

Earlier this month NatWest Intermediary Solutions introduced a 4.99 times loan-to-income cap per application on for all buy-to-let business.

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