All of the Coventry’s product types except those fixed for five years or longer will be subject to a rental cover calculation of 125% of 5.5%. For applications equal to or less than 65% LTV and for longer-term fixed rates a 5% interest rate applies.
Coventry’s decision follows the announcement made by Barclays that it would be increasing its rental cover calculation to 135% from 7 December. Barclays made the changes because it said the cuts to tax relief which landlords could claim back on monthly payments may create the risk of increased costs, putting landlords under pressure to maintain their mortgage.
From April 2017, the government will begin to phase out the higher rate of tax relief gradually over a period of four years. Those who have a buy-to-let property will no longer be able to claim 45% tax relief on their monthly payments, instead they will only be able to claim the basic rate of 20%.
A spokeswoman for the Coventry said it had made the change to reflect recent developments in the market while ensuring it retains its competitive position.
Santander has also confirmed it is reviewing its calculation. A spokeswoman for the bank said: “We are currently reviewing our coverage rates in light of the tax changes being phased in between April 2017 and April 2020 and the recent changes the Chancellor announced to Stamp Duty.
“We continue to use 125% as standard in the market and rent also needs to cover mortgage and monthly running costs – including things like voids, ground rent and service charge.”
BM Solutions made its changes in November while TMW confirmed that following ‘significant changes’ to its buy-to-let affordability criteria within the last 12 months it had no current plans to make any further changes.
A spokesman for Natwest Intermediary Solutions said it has made improvements to its buy-to-let criteria in recent months and does have an appetite to lend in the sector but is monitoring market conditions. Its current calculation is 125% x 5.5%.