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NatWest tightens affordability and stops lending to self-employed borrowers receiving SEISS

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  • 23/11/2020
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NatWest tightens affordability and stops lending to self-employed borrowers receiving SEISS
NatWest has pulled the plug on mortgages to self-employed borrowers who receive the SEISS grant, as the lender also changes affordability, criteria and rates across a number of ranges, including buy to let and interest-only.

 

Since 14 July anyone applying for the government help has had to confirm their business has been impacted by Covid-19.

As such, the bank is now declining income that has come from a business in receipt of the grant over the last four months.

The bank said: “At this time our primary purpose remains to ensure that any mortgage we provide to customers is affordable.”

NatWest is also tightening its residential affordability assessment.

In a message to advisers the lender said it was making a change to background affordability calculations “to ensure we continue to lend responsibly when assessing customers current and future mortgage eligibility”.

It warned: “As a result of the affordability changes, there may be a reduction in the maximum lend compared to previous affordability assessments.”

The changes come after the lender last week toughened buy-to-let affordability calculations, while changing its interest-only mortgages.

 

Increased appetite for interest-only borrowers

The lender has changing acceptable income types for interest-only mortgages to directly match capital and interest criteria including accepting bonus income when assessing affordability.

At the same time a new minimum combined income of £100,000 per year for joint interest-only applications, while for sole applicants the minimum qualifying income will remain at £75,000 per year.

NatWest said the aim is that the changes will help more customers secure an interest-only mortgage.

 

Buy to let affordability tightens

Rental income will no longer be accepted to achieve the minimum eligibility criteria of £25,000 per year and the maximum age at the end of the term for buy to let applications is increasing from 70 to 80.

In a note to brokers, NatWest warned: “As a result of the affordability changes, there may be a reduction in the maximum lend compared to previous affordability assessments.”

The lender is also reducing its interest coverage ratio (ICR) for basic rate taxpayers from 135 per cent to 125 per cent.

However, the lender will also now be factoring letting agent fees into the affordability assessment for lower rate taxpayers.

Following this change, for a lower rate taxpayer not using a letting agent looking to borrow £200,000, the monthly rental requirements will reduce from £1,237.50 to £1,145.83.

NatWest has also today cut buy-to-let rates by up to 84bps across its buy-to-let range.

 

Rate changes and reintroduction of free valuations

NatWest has also increased rates by up to 20bps across its core remortgage range, while pushing up rates by to 20bps and 19bps on selected two and five-year deals at 70 per cent loan to value (LTV) and above respectively.

Rates are falling on the product switch range by five bps on two-year 60 per cent LTVs.

The lender is also reintroducing free valuations for intermediary purchase products.

 

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