Natwest has announced an overhaul of its underwriting processes for portfolio landlords ahead of September’s regulatory changes for complex buy-to-let.
From 11 September, the lender will require additional information on landlords’ other residential and buy-to-let properties to enable a full affordability assessment, with the same stress rate applied to all other mortgages in addition to the current application.
Brokers will get an improved buy-to-let calculator hosted on NatWest’s intermediary website, making it easier for them to assess customers’ affordability.
A new valuation service will also be introduced to assess rental demand and rental income for all other properties being let, with the results used to validate customer affordability.
For portfolio landlord applications, additional information will be asked for in relation to landlords’ experience, use of letting agents and future plans to expand or reduce their portfolio.
A second wave of changes in the fourth quarter of the year will see NatWest raise the number of buy-to-let properties allowed per customer from four to 10, including unencumbered properties and properties mortgaged with another lender.
The lender’s interest coverage ratio will be cut from 5.5 per cent times 145 per cent to 5.5 per cent times 135 per cent, and NatWest will continue to top-slice if there is a rental shortfall, taking into account any free personal income the applicant may have.
In all cases, expected rent must continue to meet a minimum rental cover calculation of 5.5 per cent times 125 per cent.
The maximum aggregate customer borrowing allowed will be increased from £2m to £3.5m, while the current £50,000 minimum income for aggregated borrowing more than £1m will be removed.
All customers will be required to meet the lender’s standard buy-to-let minimum income of £25,000.
The PRA’s final deadline for lenders to reveal their underwriting approach for portfolio landlords – defined as those with four or more properties – is 30 September.
Graham Felstead, head of intermediary mortgages at NatWest Intermediary Solutions, said: “The buy-to-let market continues to be important for customers and brokers and it’s one that we will continue to support.
“The new PRA requirements have given us the opportunity to review our whole approach to the buy-to-let sector and I am delighted that we will continue to lend to both non-portfolio and portfolio landlords with an enhanced proposition for intermediaries and their customers.”
David Hollingworth, associate director, communications at Bath-based London and Country, said: “What comes through pretty strongly is that NatWest is keen to underline the fact that they will be in that market.
"It is good news that a lender of their stature is planning to support portfolio landlords.
“In terms of interest coverage ratio (ICR), they are spelling out there will be a slight pulling back. That is an improvement from a landlord’s perspective. The ability to use disposable income if there is not enough rent could be an important area for NatWest.”
simon.allin@ft.com
