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OneSavings Bank readies for PRA deadline with BTL affordability changes

  • 20/12/2016
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OneSavings Bank readies for PRA deadline with BTL affordability changes
OneSavings Bank will change its affordability assessments for all new buy-to-let mortgage business from 28 December to comply with rules introduced by the Prudential Regulation Authority (PRA) from 1 January.

The lender will assume a minimum stress rate of 5.5% for its rental coverage calculation, or the initial pay rate plus 1.55%, whichever is higher.

Unless borrowing is through a limited company, customers who own four or more investment properties will be defined as portfolio borrowers, while those who own less than four investment properties will be classified as non-portfolio borrowers.

Individual borrowers will be subject to a 140% rental cover requirement, while portfolio customers will be assessed using a 155% rental cover calculation.

For limited company borrowers, OneSavings Bank will use a lower rental cover of 125%, allowing these customers to borrow more against the value of a property.

The lender will use a different calculation for borrowing on specialist property, such as HMO/multi/student lets with six or more rooms and freehold block/titles of land with five or more residential units. For borrowing on specialist property through a limited company a 145% rental cover will be used, while non-portfolio customers will need a 165% rental cover and portfolio borrowers 180%.

Richard Wilson, OSB’s group chief credit officer, explained: “We have invested a significant amount of time and resource reviewing the new policy and our changes reflect a fair and equitable position for the markets we serve. Utilising the deep experience of our credit, risk and real estate functions, we analysed landlords’ property holding costs in different scenarios, factored in the new tax regime and delivered a rental stress that considers the net impact of market rent and interest rate rises.”

Remortgaging with no additional borrowing will carry no minimum stress rate, with rental cover assessed against the initial pay rate plus 1.05%. Five-year fixed rate deals will continue to be stress-tested at the initial pay rate, with no additional margin or minimum rate applicable.

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