The bank will continue to conduct an overall assessment of the applicant’s circumstances to establish if the loan is affordable, with a minimum requirement that the rental income must be at least 125% of the mortgage payment.
The Prudential Regulation Authority (PRA) imposed new underwriting standards on the buy-to-let sector from the start of the year. It offered lenders a choice of using an Interest Coverage Rate (ICR), which must stress applicants’ affordability against a notional rate of 5.5% or the use of an income affordability test which looks at landlords’ personal circumstances to establish whether the loan should be advanced.
Clydesdale is often heralded by mortgage brokers as the most useful buy-to-let lender as its ICR calculation uses the mortgage pay rate, rather than a higher hypothetical rate ranging from 5 to 5.5%.
Ying Tan, managing director of The Buy to Let Business, said: “Clydesdale has been ahead of the curve for sometime on this and whilst its ICR is at 125% there are a number of affordability checks in the background that ensure money is lent on the right property and to the right person.”
There are no further changes to Clydesdale’s buy-to-let criteria.