Redwood Bank amends BTL criteria to support ‘struggling’ landlords

The specialist bank has reduced the interest coverage ratio (ICR) to 125 per cent and will now offer lifetime interest-only products for most houses in multiple occupation (HMO) categories. 

The lender said the lifetime interest-only option would help landlords who were looking to maximise their cashflow and keep their outgoings low. 

It has also lowered the 2.5 per cent stress rate which is applied to variable, two and three-year fixed products to two per cent. 

Leon Marklew, director of business development at Redwood Bank, said: “The past few years have created an unprecedented situation for residential landlords and left many of them struggling. We want to take away some of their stress to allow them to continue making a success of their businesses. 

“We have enhanced our products to provide residential property investors with the opportunity to generate more leverage in a high-interest rate environment. Higher interest rates mean that property income is increasingly unable to drive the required quantum of debt available to landlords, so by reducing our interest coverage ratios, we are able to provide them with the opportunity to generate greater leverage, if required, despite industry-wide high rates.”  

He added: “Redwood has always been popular with brokers from an HMO perspective – and by further enhancing our HMO propositions with lifetime interest only, we are making a statement that we have an appetite for the more complex deal types that HMOs usually fall under.”