Accord has altered its rental calculation requirements in a bid to ease the burden on struggling buy-to-let (BTL) landlords.
The lender will now take into consideration whether a property is a freehold or leasehold and differentiate where a landlord is looking to remortgage their existing property where no additional capital raising is required.
Landlords taking out a five-year fix will continue to enjoy an interest coverage ratio (ICR) of 135 per cent at a stressed rate of 5 per cent or the product rate, whichever is the higher, irrespective of property tenure or whether it is a purchase or remortgage.
Meanwhile, landlords looking to re-finance an existing BTL property and not raise additional capital will also benefit from an cover ratio of 135 per cent irrespective of the product term, with a stressed rate of 5 per cent for a 5-year fix and 5.5 per cent (or 2 per cent above pay rate) for shorter-term products.
Finally, landlords looking to purchase or remortgage (with additional capital raising) on a leasehold property will require an cover ratio of 145 per cent at either 5 per cent for a 5-year fix or 5.5 per cent for shorter term products to reflect the additional management costs they incur.
Prior to the changes, all buy to let borrowing was subject to a 135 per cent ICR and a stress rate of 5.5 per cent for terms of less than five years and 5 per cent for five-year products.
Chris Maggs, Accord Buy to Let’s commercial manager, said: “We’ve reassessed our rental calculations to fairly reflect the level of costs incurred across the range of landlords’ properties, which also take into consideration the changes in the buy-to-let market.
“Landlords are currently reviewing their portfolios to ensure they’re working in the best way for them. We’re committed to supporting landlords to maintain a sustainable rental portfolio and we hope these adjustments will make a difference - whilst keeping things simple for brokers.”
Adrian Kidd, IFA at Kent-based Unleash Advice Partnership, commented: “We have about 2 or 3 enquiries we are trying to source at the moment, and trying to find a home for them is immeasurably harder than this time last year.
“The more innovation, the better, because I think all landlords will need as much help as they can get. It is good that lenders are trying to think about it from the point of view of a landlord.”
simon.allin@ft.com
