Accord introduces new BTL affordability assessments

Accord Buy To Let is introducing new minimum rental cover requirements for leasehold properties and remortgages where no additional capital raising is required.

Related topics:  Mortgages
Rozi Jones
27th April 2017
BTL buy to let sign
"We have tried to create flexibility by introducing variable rental calculations to support landlords whilst trying to keep it relatively straight forward."

Under the new requirements, which come into effect from today, landlords taking out a five-year fixed rate will continue to enjoy an interest coverage ratio of 135% at a stressed rate of 5% or the product rate, whichever is the higher, irrespective of property tenure or whether a purchase or remortgage.

Landlords who are looking to refinance an existing buy-to-let property and not raise additional capital will also benefit from an ICR of 135% irrespective of the product term. A stressed rate of 5% will apply for a five-year fixed rate, for shorter term products a stress rate of 5.5% (or 2% above pay rate) will apply.

Landlords looking to purchase or remortgage (with additional capital raising) on a leasehold property will require an ICR of 145% at either 5% for a five-year fixed rate or 5.5% for shorter term products. Accord says the increase in ICR reflects the additional cost in managing a leasehold property.

Prior to today’s changes all buy to let borrowing was subject to a 135% ICR, and a stress rate of 5.5% for terms of less than five years and 5% for five year products.

Chris Maggs, Accord Buy To Let’s Commercial Manager, said: “The changes to stamp duty and taxation impacting landlords, along with additional lender requirements around affordability, make it a challenging time for landlords.

“Most lenders have made significant changes to their interest cover ratios and stress rates, and at Accord we have tried to create flexibility by introducing variable rental calculations to support landlords whilst trying to keep it relatively straight forward.  

“We’ve always taken a cautious approach to our minimum rental calculations, prior to regulatory requirements being introduced, to ensure landlords are able to cover all cost associated with managing a rental property. This means we are in a robust position to offer landlords a competitive rate.

“We’ve reassessed our rental calculations to fairly reflect the level of costs incurred across the range of landlords’ properties, which also take into consideration the changes in the buy-to-let market. Landlords are currently reviewing their portfolios to ensure they’re working in the best way for them. We’re committed to supporting landlords to maintain a sustainable rental portfolio and we hope these adjustments will make a difference – whilst keeping things simple for brokers.”

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