Currently its rental calculation is based on 125% of the mortgage interest payment at a notional/stress rate of 5% or the initial product pay rate, whichever is the higher.
To ensure customers have sufficient rental coverage, particularly for higher LTV applications, the stress rate will now be tiered.
Where the application is for a 5 year fixed rate product, either a stress rate of 4.99% or the product rate will be used - whichever is higher irrespective of LTV.
Where the LTV is less than 65%, a stress rate of 4.99% will be used, and where the LTV is greater than 65%, a stress rate of 5.49% will be used.
Phil Rickards, head of BM Solutions, commented:
“In order to provide first class products and service to borrowers we monitor our criteria and processes continuously. This change ensures landlords have sufficient rental coverage for their Buy to let mortgage, importantly there’s no change to the application process and the calculations will be made automatically. However, in a rapidly changing environment we want to give advisers as much notice as possible.”