MortgagesFeb 8 2016

Santander creates two-tier buy-to-let affordability test

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Santander creates two-tier buy-to-let affordability test

Santander is kick-starting a buy-to-let affordability calculation to prepare for the looming tax changes set to affect the UK property market.

In his Autumn Statement, chancellor George Osborne announced a 3 per cent surcharge on stamp duty for buy-to-let investors and those buying second homes, a move set to increase costs for landlords.

From 21 February, Santander is introducing a two-tiered buy-to-let affordability test for loans up to and including 60 per cent loan-to-value, which will continue at a rate of 5 per cent.

For loans over 60 per cent LTV, the lender will increase the rate to 5.5 per cent.

A spokeswoman from Santander said this change reflects the firm’s “continued prudent approach” to lending and affordability and is in line with current market conditions.

The new tax charge will be introduced from 1 April, and the phased reduction in tax relief will start next year, adding to the cost of being a landlord.

“As a result [of these changes] landlords will be reviewing their business models and lenders will also be reviewing their rental cover calculations to ensure affordability assessments keep pace with the change,” the spokeswoman said.

“Buy-to-let continues to be a strong market and key priority for us as we look to grow our business.”

katherine.denham@ft.com