Keystone sets out portfolio underwriting policy

Keystone sets out portfolio underwriting policy

Keystone has announced changes to its underwriting requirements for portfolio landlords, which will take effect from 30 September.

The specialist lender will require landlords to provide an up-to-date property portfolio spreadsheet submitted in a standard format alongside the full mortgage application.

It is set to launch a tool for brokers to enable them to convert their clients’ portfolio spreadsheet into the required format.

Landlords’ entire portfolios will be stressed at an interest coverage ratio of 125 per cent at an interest rate of 5.5 per cent, regardless of whether the new application is made in the name of an individual or limited company.

Each property within the portfolio will be required to have 100 per cent rental cover, and portfolios that are geared above 80 per cent will not be considered.

If a portfolio passes the initial rules, Keystone will use an automated valuation model to verify a landlord’s valuation and rental figures.

The lender has already announced a 0.1 percentage point increase in brokers’ procuration fees to reflect the higher workloads they will face.

Non-portfolio landlords – those with fewer than four mortgaged buy-to-let properties – will not experience any change to the application process.

Steve Olejnik, chief operating officer of Keystone, said: “The additional information required from portfolio landlords will of course equate to a much heavier workload for brokers and their clients. To ease the process, we are releasing a tool which will enable brokers to convert their clients existing portfolio spreadsheets into the format required by Keystone.

“It has always been our aim to try and keep this process as simple as possible, so we hope this tool will be welcomed by both brokers and landlords.”

Liz Syms, chief executive at London-based Connect Mortgages, commented: “The stress test applies to the background portfolio, as opposed to the subject portfolio they are financing. Before the Prudential Regulation Authority changes, they would not pay too much attention to the whether the portfolio was performing well or not.

“Now they will look at the performance within the context of the whole portfolio. Lenders are all interpreting that part of the rule quite differently, which could have an effect on which lender an individual can go to.

“A property at 125 per cent over 5 per cent might not fit, but at 130 per cent over 6 per cent it will fit with Keystone, depending on the overall aggregate stress position of the entire portfolio.”