TMW reduces ICR for lower rate tax payers

From Wednesday, The Mortgage Works is adjusting its Interest Cover Ratio for lower rate tax payers by reducing the minimum ICR to 125% for buy-to-let mortgage applications.

Related topics:  Mortgages
Rozi Jones
15th May 2017
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"We are taking steps to make sure that those buy to let borrowers who are paying tax at the lower rate see that reflected with appropriate measures of affordability."

In May 2016 TMW, the specialist buy-to-let arm of Nationwide, announced it was amending the minimum ICR to 145% and reduced the maximum LTV to 75% in order to protect landlords ahead of the changes to landlord tax relief.

Following the subsequent publication of the PRA Supervisory Statement on Buy to Let Underwriting Standards, TMW has now developed the capability to separate out ICRs for higher and lower rate tax payers.

With zero and basic rate tax payers remaining unaffected by the change in tax regulation, TMW is reducing the minimum ICR to 125% for new buy to let mortgage borrowers who can provide income proofs to support their lower rate tax status.

To qualify for the lower 125% ICR, the maximum portfolio size upon completion of the new application is set at three properties. There is no change to policy for landlords who meet the higher 145% ICR.

There will also be no impact for existing TMW customers who are seeking a product switch or transfer of equity, providing no additional borrowing is involved.

Paul Wootton, Managing Director of Specialist Lending, said: “We are taking steps to make sure that those buy to let borrowers who are paying tax at the lower rate see that reflected with appropriate measures of affordability. TMW, as part of Nationwide, already robustly assesses the affordability of its buy to let mortgages against stress rates that are higher than the borrower’s existing rate, and wanted to take a more flexible approach for those borrowers unaffected by the incoming tax relief changes.

“As a result, we are reducing the Interest Cover Ratio to 125% for new applicants who are not subject to the tax relief changes, which will enable them to borrow affordably while recognising the need to help safeguard rental cover for all landlords over the coming years.”

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