The BTL reference rate is 4.75 per cent for a five-year fixed rate for purchase and remortgage applications or the product pay rate, whichever is higher. This is down from 5.5 per cent.
For two-year fixed rates for remortgages with no additional borrowing, the BTL reference rate is five per cent, down from 5.5 per cent or the product pay rate.
On two-year fixed rates for purchases and remortgages with additional borrowing, the BTL reference rate is 6.5 per cent, a drop from seven per cent, or the product pay rate plus two per cent.
Under the new calculations, a basic rate taxpayer with a rental income of £900 and selecting a five-year fixed rate could borrow £181,885, which is up from £157,091. This is subject to a 75 per cent loan to value limit.
The minimum rental income needed is 125 per cent or 145 per cent of the mortgage payments, based on the above applicable reference rate.
Jonathan Stinton, head of intermediary relationships at Coventry Building Society, said: “Landlords help provide homes for those who are waiting to buy or simply not in a position to buy. Our affordability changes should help make it easier for new and existing landlords to finance their rental properties and help keep up with tenant demand.
“We try to make it as easy as possible for brokers to help their landlord clients, which is why we don’t ask for a minimum income – we simply look at rental income. Our Buy to Let calculator helps brokers easily see how much their landlord clients can borrow, and these new changes to our reference rate will likely mean many of those clients can borrow more if they need to.”
Last week, Coventry Building Society made a range of rate cuts across its mortgage range, bucking the trend of increasing pricing seen in the last few weeks from other lenders.
