Allica Bank loosens commercial mortgage criteria

The stress test of its variable rate commercial mortgage is now 1.5 per cent above the Bank of England base rate, down from three per cent. The lender made this change due to the base rate stabilising and added that the change would allow businesses to be considered for larger loan amounts. 

It has also lowered its debt service cover ratio (DSCR) from 150 per cent to 130 per cent across all commercial mortgages. This will allow Allica Bank to consider a lower level of income and it said it could support more businesses this way. 

For ‘prime’ businesses which have incomes that enable them to cover loan repayments by at least 200 per cent, the lender has increased the maximum loan to value (LTV) by five per cent while maintaining the rate of owner-occupied commercial products. It said the change could mean qualifying businesses could borrow more at the same interest rate as before. 

Its asset finance customers will also see a reduction in the DSCR from 140 per cent to 125 per cent.  

Nick Baker, chief commercial officer at Allica Bank, said the decision to expand its credit appetite signified the lender’s commitment to supporting more businesses. 

He added: “In seeing a stabilising market, and following a period of uncertainty, we want to make sure that businesses have access to the lending that will enable them to invest in their futures.  

“Ultimately, these changes mean businesses can do more with less, and that we can lend more to more businesses, building on Allica’s ambition to be the true alternative to high street banks.”