Landbay has implemented a revised credit policy so remortgaging landlords can determine affordability based on market rent as opposed to the lower of market or passing rent.
Alex Witham (pictured), regional account manager for Landbay, said that the change could “carry significant implications for borrowing levels”.
Market rent is the amount the valuer determines to be the prevailing rate for the property on the day of valuation and passing rent is rent currently paid by the tenant to landlord, which can be lower than the market rent.
Witham explained: “There are various reasons why landlords charge less than the market rate, such as accommodating long-standing tenants, offering reduced rent as a reward for maintaining the property or providing assistance to tenants facing financial difficulties.”
For example, if a remortgaging landlord, using an average five-year fixed rate at 5.75 per cent for limited company , stressed at pay rate, using £1,250 market rent would give a maximum gross loan of £208,695 whereas utilising a passing rent of £1,000 the maximum loan size would be £166,956.
This is a difference of £41,739.
“Lenders who consider the market rent for affordability assessments provide an advantage to landlords who prefer not to raise the rent merely to meet lending criteria. This allows those landlords to maintain the current rental level, avoiding potential disruptions with their tenants’ current agreements,” Witham added.
Anna is currently the deputy editor for Mortgage Solutions and editor for Specialist Lending Solutions. She has worked as a journalist since 2019, having secured her Gold Standard NCTJ diploma from News Associates in a fast-track six-month course.
She started her career as a report at specialist publication The Insurance Insider covering a wide range of areas before joining Mortgage Solutions and Specialist Lending Solutions in 2021.
In her role, she helps put together and structure the news agenda for the day and writes up press releases, reports, interviews, analyses and exclusives across both titles. She also commissions blogs for Specialist Lending Solutions and hosts online masterclasses and in-person events across the business.
She has been shortlisted for three journalism awards, which include BIBA Journalist and Media Awards Scoop of Year Award in 2020, Headline Money Mortgage Journalist of the Year Award (B2B) in 2022 and 2023.
Prior to being a journalist, Anna worked in ecommerce across Snow + Rock, Cycle Surgery and Runners Need websites, and before that worked at specialist financial PR firm Rostrum.
In her spare time, Anna enjoys reading, seeing live music, and cooking for friends and family. When she gets a chance, she also enjoys hiking, skiing and indoor rock climbing.
