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Virgin Money introduces BTL top-slicing and cuts stress rates

  • 18/04/2018
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Virgin Money introduces BTL top-slicing and cuts stress rates
Virgin Money has introduced several changes to its buy-to-let lending policy including cutting a range of stress rates and allowing borrowers to include income to cover rent shortfalls.

The lender noted that top-slicing, where a landlord’s personal income is used to cover any shortfall in rent, will now be considered to justify affordability on between 100% and 145% of the mortgage payment, calculated at an interest rate of 5.50%.

Landlords exercising this option will need a minimum income of £50,000 excluding income received from buy-to-let properties.

Virgin Money has also cut stress rates in two situations.

The interest stress rate on five-year, fixed rate products has been reduced from 5.24% to 5.00%. For all other products the stress rate will remain at 5.50%.

And the straight balance swap stress rate has been reduced from 5.99% to 5.50%.

The lender appears to be making a push into the buy-to-let sector with the moves and has already confirmed it will enter the portfolio lending space this year.


Essential or dangerous?


Experts have noted that the practice of top-slicing is becoming almost essential for landlords to operate effectively in the market following the raft of regulatory and tax changes introduced over the last two years.

However, speaking at the Buy To Let Market Forum in Manchester yesterday, Mortgages for Business chief executive David Whittaker, warned that it could be highly risky if they become portfolio landlords.

“They cannot move upwards, downwards or sideways because they’re over geared and they’re over stressed and they can’t get the next property,” he said.

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