Barclays has been accused of leaving the main buy-to-let market without formally announcing its exit by imposing ‘unrealistic’ stress testing criteria to its products.
But London-based broker Tony Silver said he had given up using the bank after claiming it stress tests on a repayment basis, rather than at 5.5 per cent on an interest-only basis which he claimed is the norm for other lenders.
He added that Barclays also stress test any residential mortgage in the background at an “unrealistic” 6.99 per cent.
As a result, cases that are processed by other lenders without any difficulty are declined by Barclays, Mr Silver claimed.
But the bank defended its buy-to-let offering, denying stress testing on a repayment basis and claiming its affordability rules had been drawn up to comply with stricter Bank of England (BoE) regulations.
A number of lenders have stopped lending to portfolio landlords – those with four or more properties - following a wave of tax and regulatory changes, including the introduction of more stringent underwriting rules and the gradual phasing out of tax relief on mortgage interest.
Santander and Platform – the buy-to-let arm of the Co-op Bank – will no longer accept applications from these borrowers.
But Mr Silver said Barclays had effectively dropped out of the buy-to-let market without telling anyone.
He said: “They have all these low headline rates, but if they don’t want to do lending, they change the underwriting criteria and it stops everything, which is madness.”
“Stress testing is hard enough as it is – don’t do it on a repayment basis.
“The whole point of buy-to-let is it should be able to stand on its own two feet. If it can’t, then don’t do it. Yes, make sure someone can afford all their liabilities. What are they doing, stress testing residential at an inflated rate?
“I will just avoid them in future. There is no point in putting something into the system that is not going to go through.”
A spokesperson for Barclays said underwriters stress test new residential lending at 6.99 per cent due to regulatory guidance from the BoE Financial Policy Committee.
This states that it should be tested at 3 per cent above the lender’s follow-on tracker rate – currently 3.99 per cent for Barclays.
The spokesperson added: “On buy-to-let properties, we stress affordability at 5.5 per cent. The stressed monthly repayment amount is calculated on an interest only basis, and we also perform a check against the outstanding balance plus 3 per cent on an interest-only basis, using the higher of these two values.
“We also calculate the 5.5 per cent on a repayment basis in the background, but this figure is only used in affordability where it is lower than the output of the first two calculations.”