Mansfield Building Society has simplified stress testing of buy-to-let (BTL) mortgages as part of changes to its underwriting rules for portfolio landlords.
The building society announced that a buy-to-let stressed interest rate will be applied at the greater of 5.5 per cent or 2 per cent more than pay rate, regardless of application type or an applicant’s tax status.
Meanwhile, the interest coverage ratio (ICR) will now be calculated at 125 per cent for business buy-to-let applicants on the basic rate of tax.
For higher/additional rate tax payers, any business buy-to-let purchases, or business buy-to-let remortgage applications with additional borrowing, will continue to be calculated using an ICR of 145 per cent of the monthly mortgage interest payment at the stressed rate.
Consumer buy-to-let, regulated (family) buy-to-let, and pound-for-pound buy-to-let remortgages will all be calculated using an ICR of 125 per cent of the monthly mortgage interest payment, even if the applicant is a higher rate tax payer.
In line with the new regulatory requirements, portfolio landlords – those with four or more mortgaged properties – will need to provide an assets and liabilities statement, together with a detailed schedule of all properties and loans outstanding.
David Newby, mortgage executive at Mansfield Building Society, said: “As the buy-to-let sector continues to see further regulatory change, you can be confident that The Mansfield’s proactive approach is sufficiently agile to adopt the necessary change whilst at the same time seeking ways to innovate.
"We’ll be bringing you more news about ways in which higher earners can use personal disposable income to offset potential ICR shortfalls in due course.
“In the meantime, the approach that we’ve taken will fairly consider the individual circumstances of landlords regardless of whether they’re professionals, consumers or simply letting out a property to a close relative.”
Danny Belton, head of lender relationships at Legal & General Mortgage Club, said: “Smaller regional building societies such as The Mansfield have built their reputation on their ability to manually underwrite cases.
"The changes required for buy-to-let portfolio lending will require a more manual approach, and it is good to see The Mansfield react with these changes."
simon.allin@ft.com
