Coventry Building Society has introduced a 125% interest cover ratio (ICR) for lower rate tax payers.
The lender is also removing its requirements for minimum income (previously £25,000, or £30,000 for joint applications) – and minimum time in employment (previously 12 months).
The tiered ICR proposition for buy-to-let landlords, is based on applicants’ gross annual income and tax status.
It is:
- If each applicant’s total gross annual income is less than £40,000 and all applicants are non-taxpayers or basic rate taxpayers, the ICR is 125%.
- If any individual applicant’s total gross annual income is £40,000 or more, or if any applicant is a higher rate or additional rate tax payer, the ICR is 140%.
Coventry BS director of intermediaries Kevin Purvey said the changes were necessary as the buy-to-let market became more complex.
“We’ve listened to and worked with intermediaries, and we think that a tiered ICR calculation – as part of our overall assessment – is the best way to adapt to the changing market,” he said.
He added that these changes would allow the mutual to offer its buy to let products to a wider group of landlords.
