According to experts at Springtide Capital, this problem has been exacerbated by Birmingham Midshires changing their policy from calculating the rental coverage based on the interest pay rate of the deal to a notional 5%.
Lenders such as Woolwich and Clydesdale are an example of the small handful of lenders who still calculate the payments based on the interest pay rate. NatWest also offers a slightly more flexible approach for those clients on higher incomes.
Henry Knight, Managing Director of Springtide Capital says:
"This is this sort of approach that we need more lenders to adopt if we’re going to be able to continue to help clients at the higher LTV end. The issue is one most seen in London, but also the more rural locations where BTL yields tend to be lower also struggle. Clearly lenders need to ensure that clients are in a position to meet void periods and lend responsibly, however a more thorough approach to individual circumstances would enable us to widen the net."
"The main challenge for buy to let investors is that whilst house prices have risen, rental incomes have remained static, which is why it is increasingly difficult to get access to the right level of finance. London’s buy to let investors usually opt for mortgage products with a high loan to value because of the associated tax benefits.
"In order to keep apace of this growing demand, we would like to see more lenders follow the example of banks like Clydesdale, Woolwich and NatWest in offering a greater number of options to buy to let investors particularly looking in more depth at individual circumstances rather than adopting a more blanket approach."
