The Hinckley & Rugby Building Society has revealed its new lending policy for buy-to-let mortgages.
The changes centre on the rental stress tests for investor mortgages, to comply with the new requirements from the Prudential Regulatory Authority which apply from 1 January 2017.
Applications received from 1 January will be stressed at a higher rate, initially 5.5%, with a coverage requirement of 145%. This compares to the existing current requirement of 135% at pay rate plus 2.0%.
One exception to this is Hinckley & Rugby’s five-year fixed rate products, which have a requirement of 145% coverage at pay rate (currently 2.75% at 60% LTV) rather than the stressed rate.
The Society will, however, continue to consider applications which don’t meet these thresholds by taking into account personal income to cover the rental shortfall. The ICR (interest coverage ratio) would then be an absolute minimum of 145% at pay rate, and an affordability assessment would consider verified income and expenditure.
Carolyn Thornley-Yates, the Hinckley & Rugby’s head of intermediary sales, said: “At Hinckley & Rugby we recognise that good quality buy to let applications aren’t defined solely by the amount of rental income generated, and that there are instances where the personal ability of the borrower is more than sufficient to support a small portion of the loan, now and in the future.
“Our manual approach to underwriting allows us to consider individual situations in depth, making prudent lending decisions tailored to the borrower’s needs and circumstances.”
