Lenders rule out joining RBS with buy-to-let income cap

A number of buy-to-let lenders have confirmed to FTAdviser that they have no plans to cap income multiples on buy-to-let mortgages, following Royal Bank of Scotland’s announcement last Friday (11 July).

Last week, RBS stated it will be introducing a 4.99 times income multiple per application for all buy-to-let business.

Speaking to FTAdviser, Santander, Virgin Money, the Coventry Building Society and the Yorkshire Building Society have all confirmed that they have no plans to follow suit.

Despite the fact that Lloyds is also like RBS a state-owned bank, the lender confirmed to FTAdviser it had no plans to make changes.

A spokesperson said in a statement: “I can confirm that at Lloyds Banking Group whilst we regularly review our policies, we have no plans to make any changes.”

A spokesperson for the Coventry Building Society said: “Our current position is we are not making any changes at the moment but will continue to monitor developments and make sure that our offering is appropriate.”

Virgin Money and HSBC both said that rental income is assessed in its affordability calculations, however HSBC also implied it has a loan-to-income maximum multiple in place but declined to elaborate.

A spokesperson for Virgin said: “Virgin Money does not currently have a loan-to-income cap in place for buy to let loans. The affordability calculation for buy-to-let loans is based on the rental income of the property.”

HSBC emphasised that mortgages are agreed on a “case-by-case” basis.

A HSBC spokesperson said:: “HSBC considers all mortgage applications on an affordability basis, of which a customer’s loan to income multiple is just one of a variety of factors. For buy-to-let mortgages we also assess rental income.

“As part of regular reviews of our affordabilty model and taking a variety of factors into account, we assess the most appropriate loan to income maximum we will lend to.”

Santander confirmed it has no plans to make changes, and affirmed their current policy.

Simon Martin, head of credit risk at Yorkshire Building Society Group, said:“Yorkshire Building Society assess customer affordability in line with the new FCA regulations, by performing a robust income and expenditure assessment based on an individual’s circumstances, which results in an appropriate and responsible outcome for our mortgage customers.

“We continuously review and monitor our approach to ensure it is appropriate for loans of all sizes, however currently we have no plans to introduce an income multiple cap on high value loans”.

RBS said the change in policy has been introduced to create greater consistency between its buy-to-let and residential lending policies as it also recently introduced a strict loan-to-income multiples on its residential lending.

Earlier this year, both Lloyds and RBS have introduced a strict four times income multiple on Londoners who are applying for a residential mortgage over £500,000. The state owned banks’ move then as now did not prompt a rush in other lenders taking the same action.