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Santander to bump up rental cover ratio for buy-to-let customers

  • 08/11/2016
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Santander to bump up rental cover ratio for buy-to-let customers
Santander will increase its rental cover requirement for buy-to-let deals from 125% to 145% later this month, while replacing tiered affordability based on loan-to-value (LTV) with a single rate.

The changes, which are due to be implemented from Wednesday 23 November, will see a single affordability rate of 5.5% introduced for deals up to and including 75% LTV.

Santander said its planned tighter affordability criteria were to reflect future phased changes to taxation for landlords. Santander already stress tests at 5.5% on all cases above 60% LTV at present, the change will only affect cases below 60% LTV.

Background properties on residential applications that are let or to be let will not be affected, with Santander’s assessment remaining at 125% rental cover at 5% up to and including 60% LTV, or 5.5% above 60% LTV. The lender’s affordability calculator will assess whether it is able to consider any income from these properties or if associated costs need to be considered in its affordability calculation.

A spokeswoman for the lender said: “Following the PRA supervisory statement on underwriting standards for buy-to-let (BTL) properties, we have made a change to the way we assess affordability on BTL mortgages.”

This is the second time Santander has amended affordability assessments for buy-to-let deals this year. In February, the lender introduced a two-tiered approach for deals at and above 60% LTV.

Just yesterday, BM Solutions revealed its affordability stance in light of the PRA’s incoming underwriting standards and restriction on mortgage interest relief for landlords.

Full mortgage applications already submitted through Santander’s introducer internet by Tuesday 22 November will not be affected by the changes, with all cases submitted the following day assessed using the new policy.

Santander’s criteria and affordability calculator for buy-to-let customers will be updated to reflect the changes on 23 November.

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