HSBC UK has expanded its buy-to-let mortgage range to include top slicing, enabling landlords to use surplus personal income to support affordability calculations.
The move is aimed at helping borrowers in lower-yield areas to increase their borrowing potential or access additional funds for property improvements.
Traditionally, buy-to-let affordability has been assessed solely on rental income, which can restrict borrowing capacity where rental yields are modest. By introducing top slicing, HSBC UK will now allow landlords whose rental income falls short of the required interest coverage ratio to supplement it with their personal income.
In practice, this could mean a significant increase in borrowing power. HSBC gave an example of a landlord seeking to borrow £225,000 at 75% loan-to-value to purchase a property generating £1,200 a month in rent.
Under previous criteria, the rental income alone would have supported borrowing of around £186,000, but with top slicing, the landlord could borrow the full £225,000 — an uplift of 20%.
The enhancement follows the bank’s recent decision to raise loan-to-income multiples across its residential range, including for first-time buyers, to help customers borrow larger sums when purchasing or remortgaging.
According to HSBC UK’s July Broker Barometer, which surveyed more than 1,100 mortgage brokers, 93% said that increasing borrowing power was important to their clients, while 78% had already seen higher levels of lending agreed.
Oli O’Donoghue, head of mortgages at HSBC UK, said: “We are committed to supporting our customers by providing solutions for both the residential and buy-to-let mortgage markets.
“The introduction of top slicing into our buy-to-let mortgage range is a key example, designed to make buy-to-let mortgages more accessible, while ensuring affordability remains at our core. Many landlords, particularly in London and the South East, have strong earnings but are limited by yield-driven constraints.
“By increasing the amount that can be borrowed through top slicing, we’re enabling more landlords to achieve their property investment ambitions due to providing greater borrowing capacity.”
