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TMW halts lending above 75% LTV; lifts rental cover demand to 145%

  • 29/04/2016
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TMW halts lending above 75% LTV; lifts rental cover demand to 145%
Nationwide’s buy-to-let arm, The Mortgage Works (TMW) is increasing its rental coverage demands from 125% to 145% and will stop lending at 80% loan-to-value (LTV) from 11 May.

The move follows a series of government and regulatory interventions to decrease the lending risks associated with buy to let, and stave off the likely landlord affordability pressures brought by the mortgage interest tax relief changes phased in from 2017.

The lender said the move is a bid to ‘protect positive cash flow’ for buy-to-let landlords.

TMW confirmed it will also be withdrawing from lending above 75% LTV, with products at 80% LTV no longer on offer.

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.

TMW said it will also kick start a landlord education programme on the changes ahead with detailed information and implementation dates on the lender’s website, while a
calculator will also be available to indicate how the reduction in mortgage interest tax relief may have an effect on profit.

Paul Wootton, managing director of TMW, said: “As a responsible lender, this change is a pro-active move that recognises the need to help safeguard rental cover for landlords over the coming years, and in advance of the forthcoming changes to mortgage interest tax relief.

“TMW, as part of Nationwide, already robustly assesses the affordability of its buy-to-let mortgages against stress rates that are considerably higher than the borrower’s existing rate. The increase in the rental cover requirement is designed to strengthen this cash flow position even further, and help them withstand the impact of increased costs from the new tax regime.”

If no extra borrowing is involved, the change will have no impact for customers seeking a product switch or transfer of equity.

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