NatWest says the changes will allow brokers to help more clients secure an interest-only mortgage.
Interest-only acceptable income types will now directly match NatWest's capital and interest criteria, i.e. it can now accept bonus income when assessing affordability.
For joint interest-only applications, the lender has introduced a new minimum combined income of £100,000 per year. A sole applicant's minimum qualifying income will remain at £75,000 per year.
As a result of the affordability changes, NatWest says there may be a reduction in the maximum lend compared to previous affordability assessments.
As part of changes to its buy-to-let proposition, buy-to-let ICR is reducing from 135% to 125% for basic rate taxpayers.
Letting agent fees are currently captured for lower rate tax payers, but are not included in the affordability assessment. As NatWest has reduced the ICR, letting agent fees will now be factored in for these customers.
For example, for a lower rate tax payer not using a letting agent and looking to borrow £200,000, the monthly rental requirements will reduce from £1237.50 to £1145.83.
Additionally, the maximum age at the end of the term for buy-to-let applications is increasing from age 70 to age 80.
For applications where the term goes beyond the customer’s retirement age (for either one or both customers), only the rental income from the property being purchased/re-mortgaged will be used.
Rental income will no longer be used to achieve the minimum eligibility criteria of £25,000 per annum, however all other sources of acceptable income will remain the same.
All cases submitted before 23rd November 2020 will not be affected by these changes unless there is a significant change, such as the case lapsing or new property details required.
If an existing case would benefit from these changes, underwriters have the discretion to apply them.
