Accord Mortgages has introduced changes to its affordability assessments designed to ease pressure on landlords and help sustain the supply of private rental housing.
The Yorkshire Building Society subsidiary said it was reducing the interest coverage ratio rates (ICRRs) used to assess affordability, following a period in which higher borrowing costs have made it more difficult for landlords to meet criteria.
With interest rates now stabilising, Accord said the move would help more landlords secure finance while maintaining robust lending standards.
SHIFTING MARKET
Nicola Alvarez, head of strategic partnerships and propositions at Accord Mortgages, said the adjustments reflected the lender’s commitment to supporting brokers and their landlord clients through a shifting market.
And she added: “We recognise the increasing pressures landlords are facing, and as a buy-to-let lender, we’re committed to adapting our approach to help them access the finance they need.
“Refining our affordability criteria allows us to support brokers in helping their landlord clients to navigate a challenging landscape, without compromising their long-term sustainability.
“The private rental sector is crucial to the functioning of a healthy housing market and economy, therefore it’s so important that we, as an industry, continue to look for opportunities to support them and help to maintain the availability of quality rental homes across the UK.”
PRODUCT CHANGES
For landlords remortgaging on a like-for-like basis, the ICRR will now be set at 4.75% or the product rate plus 0.35% – whichever is higher – for products with terms of five years or more. The previous requirement was product rate plus 1%.
For shorter-term products of less than five years, the ICRR will reduce to 4.75% (previously 5.5%) or product rate plus 0.70% (previously 1%) – whichever is higher.
For purchases or remortgages involving capital raising, the ICRR for products of five years or more will also be set at 4.75% or product rate plus 0.50% (down from 1%) – whichever is higher. For terms of less than five years, the ICRR remains at 5.5% or product rate plus 2%, whichever is higher.
The lender’s interest coverage ratio (ICR) remains unchanged at 125% for basic-rate taxpayers and 145% for higher-rate taxpayers.
