It confirmed the move ‘lowers’ the ICR requirement for portfolio landlords and ‘potentially increases the amount customers could borrow against their buy-to-let property.’
Previously, the group used three criteria to assess the interest coverage ratio calculation – applicant type – so personal or limited company – and then, number and type of properties, so standard or specialist. Now, it just requires applicant type and property type.
The lender added ICR for personal applicants on specialist property has reduced to 160% from 165 or 180% previously.
John Eastgate, sales and marketing director at One Savings Bank said: “As is the case with all aspects of our lending policy, the ICR calculations are subject to periodic review to make sure that they remain appropriate.
“Feedback was that our knowledge of the market had actually led to us creating a relatively complex set of criteria, so when we reviewed them, we set ourselves an objective of making them simpler, whilst equally ensuring that they were consistent with regulatory requirements. We are happy that we have achieved both objectives and that they continue to reflect our in depth knowledge of the professional landlord market.”
A summary of the simplified approach includes:
• 140% ICR requirement for an individual with standard BTL property
• 160% ICR requirement for an individual with specialist BTL property
• 125% ICR requirement for a limited company with standard BTL property
• 145% ICR requirement for a limited company with speciist BTL property
The bank defines a standard property as a single dwelling, House in Multiple Occupation (HMO), student or multi-let property with five or fewer rooms or freehold blocks with four of fewer residential units.
It defines specialist properties as HMO, student and multi-let properties with six or more rooms or freehold blocks with five or more residential units.
Adrian Moloney, sales director at OneSavings Bank, said: “Not only will these changes simplify the buy-to-let loan process and improve understanding amongst our brokers and their clients, but this simplification could also mean the opportunity for landlords to borrow more should they need to.”
Affordability stress rates remain unchanged at a minimum of 5.5% or initial pay rate plus 1.55%.
The Prudential Regulatory Authority (PRA) changes back in September 2016 require lenders to either use an ICR test or see whether personal income is sufficient to meet the mortgage repayments.
See more on the buy-to-let underwriting rules in our ‘All you need to Know’ from the rule change on 29 September 2016.