Applicants seeking buy to let mortgages are finding their total loan amounts being reduced as a result of tighter lending restrictions, Mike Richards has claimed.
The director of London-based Mortgage Concepts said: “There needs to be more simple application criteria, as it has become extremely tight and, frankly, ridiculous.”
Mr Richards said that lenders were starting to applying stress testing after the initial general application, which until recently, he claimed most of his clients had passed and received the full amount for which they were applying.
However, the new stress testing, he said, takes into account other background criteria such as the value of the applicant’s own residential mortgage, which means some buy-to-let applicants may find they cannot borrow as much as they need.
He added: “Lenders are simply applying the mortgage market review criteria too rigidly.”
He claimed that he had a couple of applications currently going through Santander for Intermediaries, which were being subjected to this sort of extra scrutiny.
He added: “Why don’t lenders simply put the lending rate slightly higher say, 5.2 per cent, instead of the current average two-year buy-to-let lending rate of 3.9 per cent for 75 per cent loan to value, and take away stress testing?”
Mr Richards called for lenders to have clear lending rates, and publish them upfront. He said the current process was confusing and unfair.
His warning came a week after Graham Kinnear, managing director of Landlord Assist, warned that apply limits on loans-to-value in the buy-to-let market risked damaging the supply of rental properties.
Mr Kinnear said: “The banks are being asked to stress test applications to see if people can afford the mortgage if interest rates were to go up by 3 percentage points.
“Clearly, we do not advocate landlords taking loans out they can’t afford if interest rates rise, but it is important that the income those properties generate is included within any affordability calculations.”
Right to reply
A spokesman for Santander said: “We take a prudent but supportive approach to BTL lending and looks at a number of factors, whether the property is supported by the potential rental future income loan-to-value of the property when assessing the suitability of a loan application, and any future associated property-related expenses.
“We provide our online rental income calculator to help brokers assess these costs and associated shortfalls. We believe our process is transparent, and as every case is different and we regularly assess the criteria against which we make loans to ensure we reach the right lending decision.
“In the past six months we’ve opened for self employed BTL loans and increased the number of BTL properties we are prepared to lend to and will continue to review our proposition in this market.”
