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Heavier BTL stress tests not an ‘Armageddon moment’ – Whittaker

  • 18/05/2016
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Heavier BTL stress tests not an ‘Armageddon moment’ – Whittaker
Increases in the stress test levels used by buy-to-let mortgage lenders should not be viewed as an ‘Armageddon moment’ for the sector, said David Whittaker, managing director of Mortgages for Business.

Whittaker highlighted the increase in stress test levels initiated by The Mortgage Works (TMW), for example, and suggested that when making a historical comparison the maximum leverage available to borrowers was not being significantly impacted.

Speaking at FSE Manchester, on TMW’s recent move from 125% to 145% Whittaker said: “[Given] this is supposed to be a ‘seismic shift’ that we’re all worried about, with 145% [on an average yield] of 5.8% the maximum leverage available is still 73% LTV. Since January the yield has not changed and the maximum leverage is down from 84%, but the product limit was 80% anyway. This is not an Armageddon moment.”

He did however say that TMW’s ‘first mover’ status in the marketplace to 145% may only be the beginning with the mathematical equation suggesting that 156% was the appropriate stress test for higher-rate taxpayers post-2020 when the mortgage interest rate tax relief changes are in place.

Whittaker did also stress that a limited company, regardless of profitability, will be stress tested at 125%.

However, when it comes to personal buy-to-let there are already lenders making initial steps and fine-tuning stress tests upwards including Woolwich, Paragon, BM Solutions and Kent Reliance, he added.

On the CP11/16 [on buy-to-let mortgage underwriting] announcement in Q3 2016 he said: “I think it is a done deal rather than a consultation.”

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