Mansfield allows top slicing on buy-to-let

Mansfield allows top slicing on buy-to-let

Mansfield Building Society has launched a buy-to-let mortgage that allows a landlord’s personal income to be taken into account when assessing affordability.

The product is available to landlords with a minimum rental income of 100 per cent of the monthly mortgage payment calculated at the product pay rate, which is currently 3.99 per cent.

It represents a relaxation of the society’s usual affordability rules, which typically require an income coverage of 125 per cent or 145 per cent.

The product can be used for purchase and remortgage, including capital raising, with a maximum loan-to-value of 80 per cent, inclusive of fees.

It comes with an application fee of £199 and a completion fee of £1,800.

The mortgage has been made available to all brokers on a limited tranche while the Mansfield tests market demand and monitors enquiries via decisions in principle through its intermediary sales support team.

The move follows the introduction of more stringent underwriting standards from the Prudential Regulation Authority (PRA), which require lenders to assess the viability of portfolio landlords’ entire portfolio when they wish to purchase a new property.

Brokers have previously said they expect smaller lenders to capitalise on the PRA changes due to their manual underwriting capabilities, and the Mansfield’s announcement comes shortly after Keystone relaxed its buy-to-let criteria.

Mike Taylor, head of products and savings at the Mansfield, said: “With yields on rental properties being squeezed, we have identified that there’s an opportunity to test the market for landlords interested in long term capital appreciation, not just monthly income. 

“If there’s firm evidence of sustainable personal income in the background then we will take a common-sense view on affordability. As the buy to let sector continues to evolve, we believe brokers will welcome our pragmatic response.”

Ian Gwinnell, IFA at Stafford-based All Counties Financial, described the product as “a good deal, and a sensible lending approach in the current economic conditions”.

He said: “While this appears to work well in the current climate as buy-to-let owners are making a great deal of profit from their rental yield in relation to the mortgage payments, this will only work in current economic conditions, and as soon as interest rates start to increase I can see these type of products disappearing.”