The stress rates for two-year fixed rates for UK residents will fall from 9.94 per cent to 7.94 per cent, which the lender said will boost borrower affordability by 20 per cent.
For tracker products for UK residents, the stress rates will go from 9.94 per cent to 8.39 per cent to 9.49 per cent. Molo said that this will increase borrower affordability by up to 16 per cent.
Non-UK resident two-year fixed rate stress rates have reduced from 10.99 per cent to 8.99 per cent, improving borrower affordability by 18 per cent.
Non-UK resident tracker product stress rates have decreased from 10.99 per cent to 10.49 per cent to 10.99 per cent. This will increase borrower affordability by up to five per cent.
Molo reiterated that its “stress test logic” for two-year fixed rates was the higher of pay rate, follow-on rate or 5.5 per cent.
For five-year fixed rates, it is the pay rate, and for tracker rates, it is the higher of pay rate plus two per cent, follow-on rate or 5.5 per cent.
For variable rates, it is the higher of pay rate plus two per cent or 5.5 per cent.
Mark Michaelides, Molo’s VP of strategy, said: “Affordability has been one of the biggest challenges facing landlords over the past 12 months, so we’re delighted to announce a recalibration of our stress test to reflect current market conditions and help support the private rental market.
“We will continue to lend responsibly, providing confidence to brokers and borrowers alike.”
The change in stress rates come off the back of recent rate cuts by Molo, where it made reductions of up to 0.71 per cent across its fixed rates.
The lender also made the change last year to include personal income in BTL affordability assessments and released non-resident BTL mortgages last year.
Francesca Carlesi, founder and chief executive of Molo, left the firm last year, with Andrew Chepul, CEO of investor ColCap Financial serving as interim executive chairperson.
