The Royal Bank of Scotland Group has introduced a 4.99 times income multiple per application for all buy-to-let business, with effect from Monday (14 July).
The new policy will be introduced to all buy-to-let mortgages available through RBS’s retail channels.
The maximum loan-to-value for buy-to-let mortgages will remain at 75 per cent loan-to-value and the maximum loan size will still be £500,000.
Natwest said this places a strong focus on affordability and measures to safeguard its customers. This change of policy is being introduced to create greater consistency between buy-to-let and residential lending policy, RBS said.
The 81 per cent state-owned bank recently followed Lloyds Banking Group’s lead by applying a four times income multiple on Londoners seeking a residential mortgage over £500,000.
Lloyds announced this first, notably three days after Bank of England governor Mark Carney warned in an interview the Bank may itself cap income multiples to prevent a bubble. RBS closely followed Lloyds’ move.
The Financial Conduct Authority recently announced it is set to publish “general guidance” to firms to fulfil recommendations from the Bank of England to introduce mortgage income multiple caps to cool the housing market. However, this will not cover buy-to-let as it is an unregulated market.
At the end of last month, the Financial Policy Committee published a report which recommended regulators ensure mortgage lenders limit the amount of their customers that are able to take out a mortgage at more than 4.5 times their income.
